Correlation Between Piper Sandler and LPL Financial

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

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

Diversification Opportunities for Piper Sandler and LPL Financial

0.59

Correlation Coefficient

Piper Sandler  LPL Financial

Very weak diversification

The 3 months correlation between Piper and LPL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Piper Sandler Companies 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 Piper Sandler 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 Piper Sandler Companies 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 Piper Sandler i.e., Piper Sandler and LPL Financial go up and down completely randomly.

Pair Corralation between Piper Sandler and LPL Financial

Given the investment horizon of 90 days Piper Sandler Companies is expected to under-perform the LPL Financial. But the stock apears to be less risky and, when comparing its historical volatility, Piper Sandler Companies is 1.04 times less risky than LPL Financial. The stock trades about -0.09 of its potential returns per unit of risk. The LPL Financial Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  33,159  in LPL Financial Holdings on December 27, 2024 and sell it today you would earn a total of  756.00  from holding LPL Financial Holdings or generate 2.28% return on investment over 90 days.

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

Piper Sandler Companies  vs.  LPL Financial Holdings

Piper Sandler Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Piper Sandler Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 2 (%) 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 Piper Sandler and LPL Financial

The main advantage of trading using opposite Piper Sandler and LPL Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piper Sandler 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 Piper Sandler Companies 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.