Correlation Between Lkcm Small-mid and Litman Gregory

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

By analyzing existing cross correlation between Lkcm Small Mid Cap and Litman Gregory Masters, you can compare the effects of market volatilities on Lkcm Small-mid and Litman Gregory 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 Small-mid with a short position of Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lkcm Small-mid and Litman Gregory.

Diversification Opportunities for Lkcm Small-mid and Litman Gregory

0.89

Correlation Coefficient

Lkcm Small-mid  Litman Gregory

Very poor diversification

The 3 months correlation between Lkcm and Litman is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lkcm Small Mid Cap and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters and Lkcm Small-mid 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 Small Mid Cap are associated (or correlated) with Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Lkcm Small-mid i.e., Lkcm Small-mid and Litman Gregory go up and down completely randomly.

Pair Corralation between Lkcm Small-mid and Litman Gregory

Assuming the 90 days horizon Lkcm Small Mid Cap is expected to generate 9.89 times more return on investment than Litman Gregory. However, Lkcm Small-mid is 9.89 times more volatile than Litman Gregory Masters. It trades about 0.29 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.29 per unit of risk. If you would invest  1,039  in Lkcm Small Mid Cap on September 3, 2024 and sell it today you would earn a total of  192.00  from holding Lkcm Small Mid Cap or generate 18.48% return on investment over 90 days.

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

Lkcm Small Mid Cap  vs.  Litman Gregory Masters

Lkcm Small Mid

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lkcm Small Mid Cap are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Lkcm Small-mid showed solid returns over the last few months and may actually be approaching a breakup point.

Litman Gregory Masters

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Litman Gregory Masters are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Litman Gregory 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 Small-mid and Litman Gregory

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

The idea behind Lkcm Small Mid Cap and Litman Gregory Masters 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.