Correlation Between Lgm Risk and Advisory Research

Can any of the company-specific risk be diversified away by investing in both Lgm Risk and Advisory Research 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 Lgm Risk and Advisory Research into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lgm Risk Managed and Advisory Research All, you can compare the effects of market volatilities on Lgm Risk and Advisory Research 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 Lgm Risk with a short position of Advisory Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lgm Risk and Advisory Research.

Diversification Opportunities for Lgm Risk and Advisory Research

0.9

Correlation Coefficient

Lgm Risk  Advisory Research

Almost no diversification

The 3 months correlation between Lgm and Advisory is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Lgm Risk Managed and Advisory Research All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisory Research All and Lgm Risk 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 Lgm Risk Managed are associated (or correlated) with Advisory Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisory Research All has no effect on the direction of Lgm Risk i.e., Lgm Risk and Advisory Research go up and down completely randomly.

Pair Corralation between Lgm Risk and Advisory Research

Assuming the 90 days horizon Lgm Risk is expected to generate 4.85 times less return on investment than Advisory Research. But when comparing it to its historical volatility, Lgm Risk Managed is 6.48 times less risky than Advisory Research. It trades about 0.37 of its potential returns per unit of risk. Advisory Research All is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,292  in Advisory Research All on September 4, 2024 and sell it today you would earn a total of  148.00  from holding Advisory Research All or generate 11.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Lgm Risk Managed  vs.  Advisory Research All

Lgm Risk Managed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lgm Risk Managed are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lgm Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Advisory Research All

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Advisory Research All are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Advisory Research showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lgm Risk and Advisory Research

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

The idea behind Lgm Risk Managed and Advisory Research All 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.