Correlation Between Mid-cap Value and Lsv Small

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

Diversification Opportunities for Mid-cap Value and Lsv Small

0.91

Correlation Coefficient

Mid-cap Value  Lsv Small

Almost no diversification

The 3 months correlation between Mid-cap and Lsv is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Lsv Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsv Small Cap 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 Lsv Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsv Small Cap has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Lsv Small go up and down completely randomly.

Pair Corralation between Mid-cap Value and Lsv Small

Assuming the 90 days horizon Mid Cap Value Profund is expected to generate 0.93 times more return on investment than Lsv Small. However, Mid Cap Value Profund is 1.08 times less risky than Lsv Small. It trades about -0.05 of its potential returns per unit of risk. Lsv Small Cap is currently generating about -0.11 per unit of risk. If you would invest  8,838  in Mid Cap Value Profund on December 20, 2024 and sell it today you would lose (272.00) from holding Mid Cap Value Profund or give up 3.08% of portfolio value over 90 days.

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

Mid Cap Value Profund  vs.  Lsv Small Cap

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 basic 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.

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Mid-cap Value and Lsv Small

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

The idea behind Mid Cap Value Profund and Lsv Small Cap 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.