Correlation Between Lkcm Balanced and Lkcm International

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

By analyzing existing cross correlation between Lkcm Balanced Fund and Lkcm International Equity, you can compare the effects of market volatilities on Lkcm Balanced and Lkcm International 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 Lkcm Balanced with a short position of Lkcm International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lkcm Balanced and Lkcm International.

Diversification Opportunities for Lkcm Balanced and Lkcm International

-0.27

Correlation Coefficient

Lkcm Balanced  Lkcm International

Very good diversification

The 3 months correlation between Lkcm and Lkcm is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lkcm Balanced Fund and Lkcm International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm International Equity and Lkcm Balanced 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 Lkcm Balanced Fund are associated (or correlated) with Lkcm International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm International Equity has no effect on the direction of Lkcm Balanced i.e., Lkcm Balanced and Lkcm International go up and down completely randomly.

Pair Corralation between Lkcm Balanced and Lkcm International

Assuming the 90 days horizon Lkcm Balanced Fund is expected to generate 0.51 times more return on investment than Lkcm International. However, Lkcm Balanced Fund is 1.95 times less risky than Lkcm International. It trades about 0.19 of its potential returns per unit of risk. Lkcm International Equity is currently generating about -0.01 per unit of risk. If you would invest  2,817  in Lkcm Balanced Fund on September 3, 2024 and sell it today you would earn a total of  152.00  from holding Lkcm Balanced Fund or generate 5.4% return on investment over 90 days.

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

Lkcm Balanced Fund  vs.  Lkcm International Equity

Lkcm Balanced

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lkcm Balanced Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lkcm Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lkcm International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lkcm Balanced and Lkcm International

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

The idea behind Lkcm Balanced Fund and Lkcm International Equity 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.