Correlation Between LM Funding and Sunlight Financial

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

By analyzing existing cross correlation between LM Funding America and Sunlight Financial Holdings, you can compare the effects of market volatilities on LM Funding and Sunlight Financial 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 LM Funding with a short position of Sunlight Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LM Funding and Sunlight Financial.

Diversification Opportunities for LM Funding and Sunlight Financial

-0.45

Correlation Coefficient

LM Funding  Sunlight Financial

Very good diversification

The 3 months correlation between LMFA and Sunlight is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding LM Funding America and Sunlight Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunlight Financial and LM Funding 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 LM Funding America are associated (or correlated) with Sunlight Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunlight Financial has no effect on the direction of LM Funding i.e., LM Funding and Sunlight Financial go up and down completely randomly.

Pair Corralation between LM Funding and Sunlight Financial

If you would invest  280.00  in LM Funding America on August 30, 2024 and sell it today you would earn a total of  18.00  from holding LM Funding America or generate 6.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

LM Funding America  vs.  Sunlight Financial Holdings

LM Funding America

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LM Funding America are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, LM Funding sustained solid returns over the last few months and may actually be approaching a breakup point.

Sunlight Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunlight Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sunlight Financial is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with LM Funding and Sunlight Financial

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

The idea behind LM Funding America and Sunlight Financial Holdings 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.