Correlation Between Moderately Aggressive and Lkcm Equity

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

By analyzing existing cross correlation between Moderately Aggressive Balanced and Lkcm Equity Fund, you can compare the effects of market volatilities on Moderately Aggressive and Lkcm Equity 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 Moderately Aggressive with a short position of Lkcm Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderately Aggressive and Lkcm Equity.

Diversification Opportunities for Moderately Aggressive and Lkcm Equity

0.8

Correlation Coefficient

Moderately Aggressive  Lkcm Equity

Very poor diversification

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

Pair Corralation between Moderately Aggressive and Lkcm Equity

Assuming the 90 days horizon Moderately Aggressive Balanced is expected to generate 0.59 times more return on investment than Lkcm Equity. However, Moderately Aggressive Balanced is 1.69 times less risky than Lkcm Equity. It trades about 0.04 of its potential returns per unit of risk. Lkcm Equity Fund is currently generating about -0.06 per unit of risk. If you would invest  1,191  in Moderately Aggressive Balanced on October 24, 2024 and sell it today you would earn a total of  19.00  from holding Moderately Aggressive Balanced or generate 1.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Moderately Aggressive Balanced  vs.  Lkcm Equity Fund

Moderately Aggressive

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Aggressive Balanced are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Moderately Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lkcm Equity Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Moderately Aggressive and Lkcm Equity

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

The idea behind Moderately Aggressive Balanced and Lkcm Equity Fund 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.