Correlation Between Moelis and LPL Financial

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

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

Diversification Opportunities for Moelis and LPL Financial

0.61

Correlation Coefficient

Moelis  LPL Financial

Poor diversification

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

Pair Corralation between Moelis and LPL Financial

Allowing for the 90-day total investment horizon Moelis Co is expected to under-perform the LPL Financial. But the stock apears to be less risky and, when comparing its historical volatility, Moelis Co is 1.01 times less risky than LPL Financial. The stock trades about -0.14 of its potential returns per unit of risk. The LPL Financial Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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

Moelis Co  vs.  LPL Financial Holdings

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.

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.

Pair Trading with Moelis and LPL Financial

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

The idea behind Moelis Co and LPL Financial Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.