Correlation Between Mid-cap 15x and Lsv Small

Can any of the company-specific risk be diversified away by investing in both Mid-cap 15x 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 15x 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 15x Strategy and Lsv Small Cap, you can compare the effects of market volatilities on Mid-cap 15x 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 15x with a short position of Lsv Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap 15x and Lsv Small.

Diversification Opportunities for Mid-cap 15x and Lsv Small

0.96

Correlation Coefficient

Mid-cap 15x  Lsv Small

Almost no diversification

The 3 months correlation between Mid-cap and Lsv is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy 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 15x 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 15x Strategy 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 15x i.e., Mid-cap 15x and Lsv Small go up and down completely randomly.

Pair Corralation between Mid-cap 15x and Lsv Small

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 1.2 times more return on investment than Lsv Small. However, Mid-cap 15x is 1.2 times more volatile than Lsv Small Cap. It trades about 0.01 of its potential returns per unit of risk. Lsv Small Cap is currently generating about -0.02 per unit of risk. If you would invest  13,221  in Mid Cap 15x Strategy on October 10, 2024 and sell it today you would earn a total of  27.00  from holding Mid Cap 15x Strategy or generate 0.2% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Lsv Small Cap

Mid Cap 15x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Cap 15x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Mid-cap 15x 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

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.

Pair Trading with Mid-cap 15x and Lsv Small

The main advantage of trading using opposite Mid-cap 15x and Lsv Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap 15x 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 15x Strategy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.