Correlation Between Lsv Small and Ppm High

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

Diversification Opportunities for Lsv Small and Ppm High

0.53

Correlation Coefficient

Lsv Small  Ppm High

Very weak diversification

The 3 months correlation between Lsv and Ppm is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Small Cap and Ppm High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ppm High Yield 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 Ppm High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ppm High Yield has no effect on the direction of Lsv Small i.e., Lsv Small and Ppm High go up and down completely randomly.

Pair Corralation between Lsv Small and Ppm High

Assuming the 90 days horizon Lsv Small Cap is expected to under-perform the Ppm High. In addition to that, Lsv Small is 7.52 times more volatile than Ppm High Yield. It trades about -0.46 of its total potential returns per unit of risk. Ppm High Yield is currently generating about -0.21 per unit of volatility. If you would invest  899.00  in Ppm High Yield on October 1, 2024 and sell it today you would lose (6.00) from holding Ppm High Yield or give up 0.67% of portfolio value over 90 days.

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

Lsv Small Cap  vs.  Ppm High Yield

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.

Ppm High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ppm High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ppm High 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 Ppm High

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

The idea behind Lsv Small Cap and Ppm High Yield 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.