Correlation Between LM Funding and Finance Of

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

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

Diversification Opportunities for LM Funding and Finance Of

0.48

Correlation Coefficient

LM Funding  Finance Of

Very weak diversification

The 3 months correlation between LMFA and Finance is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding LM Funding America and Finance of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finance of America and LM Funding 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 LM Funding America are associated (or correlated) with Finance Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finance of America has no effect on the direction of LM Funding i.e., LM Funding and Finance Of go up and down completely randomly.

Pair Corralation between LM Funding and Finance Of

Given the investment horizon of 90 days LM Funding is expected to generate 2.81 times less return on investment than Finance Of. But when comparing it to its historical volatility, LM Funding America is 1.45 times less risky than Finance Of. It trades about 0.09 of its potential returns per unit of risk. Finance of America is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  974.00  in Finance of America on September 5, 2024 and sell it today you would earn a total of  1,013  from holding Finance of America or generate 104.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

LM Funding America  vs.  Finance of America

LM Funding America

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LM Funding America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, LM Funding sustained solid returns over the last few months and may actually be approaching a breakup point.

Finance of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Finance of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Finance Of sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LM Funding and Finance Of

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

The idea behind LM Funding America and Finance of 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.