Correlation Between LM Funding and KYN Capital

Can any of the company-specific risk be diversified away by investing in both LM Funding and KYN Capital 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 KYN Capital 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 KYN Capital Group, you can compare the effects of market volatilities on LM Funding and KYN Capital 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 KYN Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of LM Funding and KYN Capital.

Diversification Opportunities for LM Funding and KYN Capital

-0.36

Correlation Coefficient

LM Funding  KYN Capital

Very good diversification

The 3 months correlation between LMFA and KYN is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding LM Funding America and KYN Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KYN Capital Group 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 KYN Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KYN Capital Group has no effect on the direction of LM Funding i.e., LM Funding and KYN Capital go up and down completely randomly.

Pair Corralation between LM Funding and KYN Capital

Given the investment horizon of 90 days LM Funding America is expected to generate 0.81 times more return on investment than KYN Capital. However, LM Funding America is 1.24 times less risky than KYN Capital. It trades about 0.12 of its potential returns per unit of risk. KYN Capital Group is currently generating about -0.03 per unit of risk. If you would invest  263.00  in LM Funding America on September 5, 2024 and sell it today you would earn a total of  36.00  from holding LM Funding America or generate 13.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

LM Funding America  vs.  KYN Capital Group

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.

KYN Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KYN Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, KYN Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LM Funding and KYN Capital

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

The idea behind LM Funding America and KYN Capital Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.