Correlation Between Lgm Risk and Power Dividend

Can any of the company-specific risk be diversified away by investing in both Lgm Risk and Power Dividend 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 Lgm Risk and Power Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lgm Risk Managed and Power Dividend Index, you can compare the effects of market volatilities on Lgm Risk and Power Dividend 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 Lgm Risk with a short position of Power Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lgm Risk and Power Dividend.

Diversification Opportunities for Lgm Risk and Power Dividend

0.89

Correlation Coefficient

Lgm Risk  Power Dividend

Very poor diversification

The 3 months correlation between Lgm and Power is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lgm Risk Managed and Power Dividend Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Dividend Index and Lgm Risk 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 Lgm Risk Managed are associated (or correlated) with Power Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Dividend Index has no effect on the direction of Lgm Risk i.e., Lgm Risk and Power Dividend go up and down completely randomly.

Pair Corralation between Lgm Risk and Power Dividend

Assuming the 90 days horizon Lgm Risk is expected to generate 2.24 times less return on investment than Power Dividend. But when comparing it to its historical volatility, Lgm Risk Managed is 2.03 times less risky than Power Dividend. It trades about 0.11 of its potential returns per unit of risk. Power Dividend Index is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  860.00  in Power Dividend Index on September 12, 2024 and sell it today you would earn a total of  102.00  from holding Power Dividend Index or generate 11.86% return on investment over 90 days.

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

Lgm Risk Managed  vs.  Power Dividend Index

Lgm Risk Managed

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lgm Risk Managed are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lgm Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Power Dividend Index

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Dividend Index are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Power Dividend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lgm Risk and Power Dividend

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

The idea behind Lgm Risk Managed and Power Dividend Index 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.