Correlation Between Locorr Dynamic and Absolute Capital

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

By analyzing existing cross correlation between Locorr Dynamic Equity and Absolute Capital Opportunities, you can compare the effects of market volatilities on Locorr Dynamic and Absolute Capital 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 Locorr Dynamic with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locorr Dynamic and Absolute Capital.

Diversification Opportunities for Locorr Dynamic and Absolute Capital

0.09

Correlation Coefficient

Locorr Dynamic  Absolute Capital

Significant diversification

The 3 months correlation between Locorr and Absolute is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Locorr Dynamic Equity and Absolute Capital Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Opp and Locorr Dynamic 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 Locorr Dynamic Equity are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Opp has no effect on the direction of Locorr Dynamic i.e., Locorr Dynamic and Absolute Capital go up and down completely randomly.

Pair Corralation between Locorr Dynamic and Absolute Capital

Assuming the 90 days horizon Locorr Dynamic Equity is expected to under-perform the Absolute Capital. In addition to that, Locorr Dynamic is 1.58 times more volatile than Absolute Capital Opportunities. It trades about -0.12 of its total potential returns per unit of risk. Absolute Capital Opportunities is currently generating about -0.02 per unit of volatility. If you would invest  1,054  in Absolute Capital Opportunities on December 4, 2024 and sell it today you would lose (5.00) from holding Absolute Capital Opportunities or give up 0.47% of portfolio value over 90 days.

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

Locorr Dynamic Equity  vs.  Absolute Capital Opportunities

Locorr Dynamic Equity

Risk-Adjusted Performance

Very Weak

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

Absolute Capital Opp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Locorr Dynamic and Absolute Capital

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

The idea behind Locorr Dynamic Equity and Absolute Capital Opportunities 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.