Correlation Between Lsv Small and Hanlon Tactical

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

By analyzing existing cross correlation between Lsv Small Cap and Hanlon Tactical Dividend, you can compare the effects of market volatilities on Lsv Small and Hanlon Tactical 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 Lsv Small with a short position of Hanlon Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lsv Small and Hanlon Tactical.

Diversification Opportunities for Lsv Small and Hanlon Tactical

0.89

Correlation Coefficient

Lsv Small  Hanlon Tactical

Very poor diversification

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

Pair Corralation between Lsv Small and Hanlon Tactical

Assuming the 90 days horizon Lsv Small Cap is expected to under-perform the Hanlon Tactical. In addition to that, Lsv Small is 1.07 times more volatile than Hanlon Tactical Dividend. It trades about -0.09 of its total potential returns per unit of risk. Hanlon Tactical Dividend is currently generating about -0.06 per unit of volatility. If you would invest  1,321  in Hanlon Tactical Dividend on December 19, 2024 and sell it today you would lose (44.00) from holding Hanlon Tactical Dividend or give up 3.33% of portfolio value over 90 days.

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

Lsv Small Cap  vs.  Hanlon Tactical Dividend

Lsv Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lsv Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lsv Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanlon Tactical Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanlon Tactical Dividend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Hanlon Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lsv Small and Hanlon Tactical

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

The idea behind Lsv Small Cap and Hanlon Tactical Dividend 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.