Correlation Between Ab Bond and Lkcm Small

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

By analyzing existing cross correlation between Ab Bond Inflation and Lkcm Small Cap, you can compare the effects of market volatilities on Ab Bond and Lkcm 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 Ab Bond with a short position of Lkcm Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and Lkcm Small.

Diversification Opportunities for Ab Bond and Lkcm Small

-0.62

Correlation Coefficient

Ab Bond  Lkcm Small

Excellent diversification

The 3 months correlation between ABNYX and Lkcm is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Lkcm Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Small Cap and Ab Bond 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 Ab Bond Inflation are associated (or correlated) with Lkcm Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Small Cap has no effect on the direction of Ab Bond i.e., Ab Bond and Lkcm Small go up and down completely randomly.

Pair Corralation between Ab Bond and Lkcm Small

Assuming the 90 days horizon Ab Bond is expected to generate 5.4 times less return on investment than Lkcm Small. But when comparing it to its historical volatility, Ab Bond Inflation is 5.49 times less risky than Lkcm Small. It trades about 0.09 of its potential returns per unit of risk. Lkcm Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,306  in Lkcm Small Cap on September 15, 2024 and sell it today you would earn a total of  35.00  from holding Lkcm Small Cap or generate 1.52% return on investment over 90 days.

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

Ab Bond Inflation  vs.  Lkcm Small Cap

Ab Bond Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lkcm Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lkcm Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Lkcm Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ab Bond and Lkcm Small

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

The idea behind Ab Bond Inflation and Lkcm 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.