Correlation Between LPL Financial and Moelis

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

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

Diversification Opportunities for LPL Financial and Moelis

0.61

Correlation Coefficient

LPL Financial  Moelis

Poor diversification

The 3 months correlation between LPL and Moelis is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Moelis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moelis and LPL Financial 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 LPL Financial Holdings are associated (or correlated) with Moelis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moelis has no effect on the direction of LPL Financial i.e., LPL Financial and Moelis go up and down completely randomly.

Pair Corralation between LPL Financial and Moelis

Given the investment horizon of 90 days LPL Financial Holdings is expected to generate 1.01 times more return on investment than Moelis. However, LPL Financial is 1.01 times more volatile than Moelis Co. It trades about 0.02 of its potential returns per unit of risk. Moelis Co is currently generating about -0.14 per unit of risk. If you would invest  33,559  in LPL Financial Holdings on December 26, 2024 and sell it today you would earn a total of  356.00  from holding LPL Financial Holdings or generate 1.06% return on investment over 90 days.

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

LPL Financial Holdings  vs.  Moelis Co

LPL Financial Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, LPL Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Moelis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Moelis Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LPL Financial and Moelis

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

The idea behind LPL Financial Holdings and Moelis Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.