Correlation Between Lebenthal Lisanti and Aqr Small

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

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

Diversification Opportunities for Lebenthal Lisanti and Aqr Small

0.97

Correlation Coefficient

Lebenthal Lisanti  Aqr Small

Almost no diversification

The 3 months correlation between Lebenthal and Aqr is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Lebenthal Lisanti Small and Aqr Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Small Cap and Lebenthal Lisanti 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 Lebenthal Lisanti Small are associated (or correlated) with Aqr Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Small Cap has no effect on the direction of Lebenthal Lisanti i.e., Lebenthal Lisanti and Aqr Small go up and down completely randomly.

Pair Corralation between Lebenthal Lisanti and Aqr Small

Assuming the 90 days horizon Lebenthal Lisanti Small is expected to generate 0.94 times more return on investment than Aqr Small. However, Lebenthal Lisanti Small is 1.07 times less risky than Aqr Small. It trades about 0.17 of its potential returns per unit of risk. Aqr Small Cap is currently generating about 0.15 per unit of risk. If you would invest  1,936  in Lebenthal Lisanti Small on September 12, 2024 and sell it today you would earn a total of  285.00  from holding Lebenthal Lisanti Small or generate 14.72% return on investment over 90 days.

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

Lebenthal Lisanti Small  vs.  Aqr Small Cap

Lebenthal Lisanti Small

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lebenthal Lisanti Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Lebenthal Lisanti showed solid returns over the last few months and may actually be approaching a breakup point.

Aqr Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lebenthal Lisanti and Aqr Small

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

The idea behind Lebenthal Lisanti Small and Aqr 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 Global Correlations module to find global opportunities by holding instruments from different markets.