Correlation Between Lkcm Balanced and Lkcm Small

Can any of the company-specific risk be diversified away by investing in both Lkcm Balanced and Lkcm 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 Lkcm Balanced and Lkcm Small 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 Small Cap, you can compare the effects of market volatilities on Lkcm Balanced and Lkcm 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 Lkcm Balanced with a short position of Lkcm Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lkcm Balanced and Lkcm Small.

Diversification Opportunities for Lkcm Balanced and Lkcm Small

0.91

Correlation Coefficient

Lkcm Balanced  Lkcm Small

Almost no diversification

The 3 months correlation between Lkcm and Lkcm is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Lkcm Balanced Fund and Lkcm Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Small Cap has no effect on the direction of Lkcm Balanced i.e., Lkcm Balanced and Lkcm Small go up and down completely randomly.

Pair Corralation between Lkcm Balanced and Lkcm Small

Assuming the 90 days horizon Lkcm Balanced Fund is expected to generate 0.52 times more return on investment than Lkcm Small. However, Lkcm Balanced Fund is 1.91 times less risky than Lkcm Small. It trades about -0.1 of its potential returns per unit of risk. Lkcm Small Cap is currently generating about -0.18 per unit of risk. If you would invest  2,956  in Lkcm Balanced Fund on December 1, 2024 and sell it today you would lose (129.00) from holding Lkcm Balanced Fund or give up 4.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Lkcm Balanced Fund  vs.  Lkcm Small Cap

Lkcm Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lkcm Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. 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 Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lkcm Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Lkcm Balanced and Lkcm Small

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

The idea behind Lkcm Balanced Fund and Lkcm 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.