Correlation Between Sentage Holdings and LM Funding

Can any of the company-specific risk be diversified away by investing in both Sentage Holdings and LM Funding 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 Sentage Holdings and LM Funding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sentage Holdings and LM Funding America, you can compare the effects of market volatilities on Sentage Holdings and LM Funding 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 Sentage Holdings with a short position of LM Funding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentage Holdings and LM Funding.

Diversification Opportunities for Sentage Holdings and LM Funding

0.45

Correlation Coefficient

Sentage Holdings  LM Funding

Very weak diversification

The 3 months correlation between Sentage and LMFA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sentage Holdings and LM Funding America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LM Funding America and Sentage Holdings 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 Sentage Holdings are associated (or correlated) with LM Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LM Funding America has no effect on the direction of Sentage Holdings i.e., Sentage Holdings and LM Funding go up and down completely randomly.

Pair Corralation between Sentage Holdings and LM Funding

Given the investment horizon of 90 days Sentage Holdings is expected to generate 1.2 times more return on investment than LM Funding. However, Sentage Holdings is 1.2 times more volatile than LM Funding America. It trades about -0.02 of its potential returns per unit of risk. LM Funding America is currently generating about -0.29 per unit of risk. If you would invest  190.00  in Sentage Holdings on November 28, 2024 and sell it today you would lose (6.00) from holding Sentage Holdings or give up 3.16% of portfolio value over 90 days.

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

Sentage Holdings  vs.  LM Funding America

Sentage Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentage Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sentage Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

LM Funding America

Risk-Adjusted Performance

Very Weak

Over the last 90 days LM Funding America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sentage Holdings and LM Funding

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

The idea behind Sentage Holdings and LM Funding America 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.