Correlation Between Lsv Small and Aggressive Growth

Can any of the company-specific risk be diversified away by investing in both Lsv Small and Aggressive Growth 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 Aggressive Growth 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 Aggressive Growth Portfolio, you can compare the effects of market volatilities on Lsv Small and Aggressive Growth 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lsv Small and Aggressive Growth.

Diversification Opportunities for Lsv Small and Aggressive Growth

0.69

Correlation Coefficient

Lsv Small  Aggressive Growth

Poor diversification

The 3 months correlation between Lsv and Aggressive is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Small Cap and Aggressive Growth Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Lsv Small i.e., Lsv Small and Aggressive Growth go up and down completely randomly.

Pair Corralation between Lsv Small and Aggressive Growth

Assuming the 90 days horizon Lsv Small Cap is expected to under-perform the Aggressive Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Lsv Small Cap is 1.27 times less risky than Aggressive Growth. The mutual fund trades about -0.36 of its potential returns per unit of risk. The Aggressive Growth Portfolio is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  10,556  in Aggressive Growth Portfolio on October 10, 2024 and sell it today you would lose (212.00) from holding Aggressive Growth Portfolio or give up 2.01% of portfolio value over 90 days.

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

Lsv Small Cap  vs.  Aggressive Growth Portfolio

Lsv Small Cap

Risk-Adjusted Performance

0 of 100

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.

Aggressive Growth

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Aggressive Growth Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Aggressive Growth 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 Aggressive Growth

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

The idea behind Lsv Small Cap and Aggressive Growth Portfolio 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.