Correlation Between Lkcm Equity and Lkcm Balanced

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

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

Diversification Opportunities for Lkcm Equity and Lkcm Balanced

0.98

Correlation Coefficient

Lkcm Equity  Lkcm Balanced

Almost no diversification

The 3 months correlation between Lkcm and Lkcm is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Lkcm Equity Fund and Lkcm Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Balanced and Lkcm Equity 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 Equity Fund are associated (or correlated) with Lkcm Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Balanced has no effect on the direction of Lkcm Equity i.e., Lkcm Equity and Lkcm Balanced go up and down completely randomly.

Pair Corralation between Lkcm Equity and Lkcm Balanced

Assuming the 90 days horizon Lkcm Equity Fund is expected to generate 1.73 times more return on investment than Lkcm Balanced. However, Lkcm Equity is 1.73 times more volatile than Lkcm Balanced Fund. It trades about 0.18 of its potential returns per unit of risk. Lkcm Balanced Fund is currently generating about 0.19 per unit of risk. If you would invest  3,845  in Lkcm Equity Fund on September 3, 2024 and sell it today you would earn a total of  338.00  from holding Lkcm Equity Fund or generate 8.79% return on investment over 90 days.

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

Lkcm Equity Fund  vs.  Lkcm Balanced Fund

Lkcm Equity Fund

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lkcm Equity Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lkcm Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Lkcm Equity and Lkcm Balanced

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

The idea behind Lkcm Equity Fund and Lkcm Balanced 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.