Correlation Between Hotchkis Wiley and Leuthold Core

Can any of the company-specific risk be diversified away by investing in both Hotchkis Wiley and Leuthold Core at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hotchkis Wiley and Leuthold Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hotchkis Wiley Small and Leuthold E Investment, you can compare the effects of market volatilities on Hotchkis Wiley and Leuthold Core and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hotchkis Wiley with a short position of Leuthold Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotchkis Wiley and Leuthold Core.

Diversification Opportunities for Hotchkis Wiley and Leuthold Core

0.9

Correlation Coefficient

Hotchkis Wiley  Leuthold Core

Almost no diversification

The 3 months correlation between Hotchkis and Leuthold is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Hotchkis Wiley Small and Leuthold E Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leuthold E Investment and Hotchkis Wiley is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hotchkis Wiley Small are associated (or correlated) with Leuthold Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leuthold E Investment has no effect on the direction of Hotchkis Wiley i.e., Hotchkis Wiley and Leuthold Core go up and down completely randomly.

Pair Corralation between Hotchkis Wiley and Leuthold Core

Assuming the 90 days horizon Hotchkis Wiley Small is expected to under-perform the Leuthold Core. In addition to that, Hotchkis Wiley is 1.88 times more volatile than Leuthold E Investment. It trades about -0.1 of its total potential returns per unit of risk. Leuthold E Investment is currently generating about -0.02 per unit of volatility. If you would invest  2,133  in Leuthold E Investment on December 29, 2024 and sell it today you would lose (20.00) from holding Leuthold E Investment or give up 0.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Hotchkis Wiley Small  vs.  Leuthold E Investment

Hotchkis Wiley Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hotchkis Wiley Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Leuthold E Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leuthold E Investment has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Leuthold Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hotchkis Wiley and Leuthold Core

The main advantage of trading using opposite Hotchkis Wiley and Leuthold Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotchkis Wiley position performs unexpectedly, Leuthold Core can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Leuthold Core will offset losses from the drop in Leuthold Core's long position.

The idea behind Hotchkis Wiley Small and Leuthold E Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.