Correlation Between Lkcm Small and Real Estate

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

Diversification Opportunities for Lkcm Small and Real Estate

-0.28

Correlation Coefficient

Lkcm Small  Real Estate

Very good diversification

The 3 months correlation between Lkcm and Real is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lkcm Small Mid Cap and Real Estate Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Ultrasector and Lkcm Small 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Ultrasector has no effect on the direction of Lkcm Small i.e., Lkcm Small and Real Estate go up and down completely randomly.

Pair Corralation between Lkcm Small and Real Estate

Assuming the 90 days horizon Lkcm Small Mid Cap is expected to generate 0.68 times more return on investment than Real Estate. However, Lkcm Small Mid Cap is 1.46 times less risky than Real Estate. It trades about 0.1 of its potential returns per unit of risk. Real Estate Ultrasector is currently generating about 0.04 per unit of risk. If you would invest  963.00  in Lkcm Small Mid Cap on September 10, 2024 and sell it today you would earn a total of  266.00  from holding Lkcm Small Mid Cap or generate 27.62% return on investment over 90 days.

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

Lkcm Small Mid Cap  vs.  Real Estate Ultrasector

Lkcm Small Mid

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lkcm Small Mid Cap are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Lkcm Small showed solid returns over the last few months and may actually be approaching a breakup point.

Real Estate Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Real Estate 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 and Real Estate

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

The idea behind Lkcm Small Mid Cap and Real Estate Ultrasector 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.