Correlation Between Dynamic Us and Lsv Small

Can any of the company-specific risk be diversified away by investing in both Dynamic Us and Lsv Small 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 Dynamic Us and Lsv Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dynamic Opportunity Fund and Lsv Small Cap, you can compare the effects of market volatilities on Dynamic Us and Lsv Small 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 Dynamic Us with a short position of Lsv Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Us and Lsv Small.

Diversification Opportunities for Dynamic Us and Lsv Small

0.7

Correlation Coefficient

Dynamic Us  Lsv Small

Poor diversification

The 3 months correlation between Dynamic and Lsv is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Opportunity Fund and Lsv Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsv Small Cap and Dynamic Us 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 Dynamic Opportunity Fund are associated (or correlated) with Lsv Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsv Small Cap has no effect on the direction of Dynamic Us i.e., Dynamic Us and Lsv Small go up and down completely randomly.

Pair Corralation between Dynamic Us and Lsv Small

Assuming the 90 days horizon Dynamic Us is expected to generate 2.12 times less return on investment than Lsv Small. But when comparing it to its historical volatility, Dynamic Opportunity Fund is 1.26 times less risky than Lsv Small. It trades about 0.01 of its potential returns per unit of risk. Lsv Small Cap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,659  in Lsv Small Cap on October 11, 2024 and sell it today you would earn a total of  190.00  from holding Lsv Small Cap or generate 11.45% return on investment over 90 days.

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

Dynamic Opportunity Fund  vs.  Lsv Small Cap

Dynamic Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynamic Opportunity Fund 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Lsv Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dynamic Us and Lsv Small

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

The idea behind Dynamic Opportunity Fund and Lsv Small 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.