Correlation Between Lgm Risk and Ariel Appreciation

Can any of the company-specific risk be diversified away by investing in both Lgm Risk and Ariel Appreciation 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 Ariel Appreciation 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 Ariel Appreciation Fund, you can compare the effects of market volatilities on Lgm Risk and Ariel Appreciation 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 Ariel Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lgm Risk and Ariel Appreciation.

Diversification Opportunities for Lgm Risk and Ariel Appreciation

0.56

Correlation Coefficient

Lgm Risk  Ariel Appreciation

Very weak diversification

The 3 months correlation between Lgm and Ariel is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lgm Risk Managed and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation 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 Ariel Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Lgm Risk i.e., Lgm Risk and Ariel Appreciation go up and down completely randomly.

Pair Corralation between Lgm Risk and Ariel Appreciation

Assuming the 90 days horizon Lgm Risk Managed is expected to generate 0.2 times more return on investment than Ariel Appreciation. However, Lgm Risk Managed is 5.11 times less risky than Ariel Appreciation. It trades about -0.22 of its potential returns per unit of risk. Ariel Appreciation Fund is currently generating about -0.25 per unit of risk. If you would invest  1,151  in Lgm Risk Managed on October 11, 2024 and sell it today you would lose (21.00) from holding Lgm Risk Managed or give up 1.82% of portfolio value over 90 days.

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

Lgm Risk Managed  vs.  Ariel Appreciation Fund

Lgm Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lgm Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. 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.

Ariel Appreciation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lgm Risk and Ariel Appreciation

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

The idea behind Lgm Risk Managed and Ariel Appreciation Fund 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.