Correlation Between Mid-cap Value and Lgm Risk

Can any of the company-specific risk be diversified away by investing in both Mid-cap Value and Lgm Risk 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 Mid-cap Value and Lgm Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap Value Profund and Lgm Risk Managed, you can compare the effects of market volatilities on Mid-cap Value and Lgm Risk 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 Mid-cap Value with a short position of Lgm Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Value and Lgm Risk.

Diversification Opportunities for Mid-cap Value and Lgm Risk

0.8

Correlation Coefficient

Mid-cap Value  Lgm Risk

Very poor diversification

The 3 months correlation between Mid-cap and Lgm is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Lgm Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lgm Risk Managed and Mid-cap Value 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 Mid Cap Value Profund are associated (or correlated) with Lgm Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lgm Risk Managed has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Lgm Risk go up and down completely randomly.

Pair Corralation between Mid-cap Value and Lgm Risk

Assuming the 90 days horizon Mid Cap Value Profund is expected to under-perform the Lgm Risk. In addition to that, Mid-cap Value is 2.66 times more volatile than Lgm Risk Managed. It trades about -0.04 of its total potential returns per unit of risk. Lgm Risk Managed is currently generating about -0.04 per unit of volatility. If you would invest  1,131  in Lgm Risk Managed on December 28, 2024 and sell it today you would lose (9.00) from holding Lgm Risk Managed or give up 0.8% of portfolio value over 90 days.

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

Mid Cap Value Profund  vs.  Lgm Risk Managed

Mid Cap Value

Risk-Adjusted Performance

Very Weak

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

Lgm Risk Managed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mid-cap Value and Lgm Risk

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

The idea behind Mid Cap Value Profund and Lgm Risk Managed 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.