Correlation Between LPL Financial and Piper Sandler

Can any of the company-specific risk be diversified away by investing in both LPL Financial and Piper Sandler 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 Piper Sandler 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 Piper Sandler Companies, you can compare the effects of market volatilities on LPL Financial and Piper Sandler 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 Piper Sandler. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPL Financial and Piper Sandler.

Diversification Opportunities for LPL Financial and Piper Sandler

0.59

Correlation Coefficient

LPL Financial  Piper Sandler

Very weak diversification

The 3 months correlation between LPL and Piper is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Piper Sandler Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piper Sandler Companies 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 Piper Sandler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piper Sandler Companies has no effect on the direction of LPL Financial i.e., LPL Financial and Piper Sandler go up and down completely randomly.

Pair Corralation between LPL Financial and Piper Sandler

Given the investment horizon of 90 days LPL Financial Holdings is expected to generate 1.04 times more return on investment than Piper Sandler. However, LPL Financial is 1.04 times more volatile than Piper Sandler Companies. It trades about 0.03 of its potential returns per unit of risk. Piper Sandler Companies is currently generating about -0.09 per unit of risk. If you would invest  33,159  in LPL Financial Holdings on December 27, 2024 and sell it today you would earn a total of  756.00  from holding LPL Financial Holdings or generate 2.28% return on investment over 90 days.

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

LPL Financial Holdings  vs.  Piper Sandler Companies

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 2 (%) 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.

Piper Sandler Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Piper Sandler Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with LPL Financial and Piper Sandler

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

The idea behind LPL Financial Holdings and Piper Sandler Companies 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.