Correlation Between Kensington Managed and Lsv Small

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

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

Diversification Opportunities for Kensington Managed and Lsv Small

0.07

Correlation Coefficient

Kensington Managed  Lsv Small

Significant diversification

The 3 months correlation between Kensington and Lsv is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Managed Income 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 Kensington Managed 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 Kensington Managed Income 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 Kensington Managed i.e., Kensington Managed and Lsv Small go up and down completely randomly.

Pair Corralation between Kensington Managed and Lsv Small

Assuming the 90 days horizon Kensington Managed Income is expected to generate 0.24 times more return on investment than Lsv Small. However, Kensington Managed Income is 4.16 times less risky than Lsv Small. It trades about -0.02 of its potential returns per unit of risk. Lsv Small Cap is currently generating about -0.08 per unit of risk. If you would invest  971.00  in Kensington Managed Income on December 30, 2024 and sell it today you would lose (3.00) from holding Kensington Managed Income or give up 0.31% of portfolio value over 90 days.

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

Kensington Managed Income  vs.  Lsv Small Cap

Kensington Managed Income

Risk-Adjusted Performance

Very Weak

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

Lsv Small Cap

Risk-Adjusted Performance

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 Kensington Managed and Lsv Small

The main advantage of trading using opposite Kensington Managed and Lsv Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kensington Managed 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 Kensington Managed Income 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.