Correlation Between Hotchkis Wiley and Lkcm Small-mid

Can any of the company-specific risk be diversified away by investing in both Hotchkis Wiley and Lkcm Small-mid 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 Lkcm Small-mid 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 Lkcm Small Mid Cap, you can compare the effects of market volatilities on Hotchkis Wiley and Lkcm Small-mid 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 Lkcm Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotchkis Wiley and Lkcm Small-mid.

Diversification Opportunities for Hotchkis Wiley and Lkcm Small-mid

0.86

Correlation Coefficient

Hotchkis Wiley  Lkcm Small-mid

Very poor diversification

The 3 months correlation between Hotchkis and Lkcm is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hotchkis Wiley Small and Lkcm Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Small Mid 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 Lkcm Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Small Mid has no effect on the direction of Hotchkis Wiley i.e., Hotchkis Wiley and Lkcm Small-mid go up and down completely randomly.

Pair Corralation between Hotchkis Wiley and Lkcm Small-mid

Assuming the 90 days horizon Hotchkis Wiley Small is expected to under-perform the Lkcm Small-mid. In addition to that, Hotchkis Wiley is 1.39 times more volatile than Lkcm Small Mid Cap. It trades about -0.18 of its total potential returns per unit of risk. Lkcm Small Mid Cap is currently generating about -0.14 per unit of volatility. If you would invest  1,228  in Lkcm Small Mid Cap on December 1, 2024 and sell it today you would lose (97.00) from holding Lkcm Small Mid Cap or give up 7.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Hotchkis Wiley Small  vs.  Lkcm Small Mid Cap

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 weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Lkcm Small Mid

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hotchkis Wiley and Lkcm Small-mid

The main advantage of trading using opposite Hotchkis Wiley and Lkcm Small-mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotchkis Wiley position performs unexpectedly, Lkcm Small-mid 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 Lkcm Small-mid will offset losses from the drop in Lkcm Small-mid's long position.

The idea behind Hotchkis Wiley Small and Lkcm Small Mid Cap 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.