Correlation Between LPL Financial and Evercore Partners

Can any of the company-specific risk be diversified away by investing in both LPL Financial and Evercore Partners 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 LPL Financial and Evercore Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LPL Financial Holdings and Evercore Partners, you can compare the effects of market volatilities on LPL Financial and Evercore Partners 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 LPL Financial with a short position of Evercore Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPL Financial and Evercore Partners.

Diversification Opportunities for LPL Financial and Evercore Partners

0.95

Correlation Coefficient

LPL Financial  Evercore Partners

Almost no diversification

The 3 months correlation between LPL and Evercore is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Evercore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evercore Partners and LPL Financial 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 LPL Financial Holdings are associated (or correlated) with Evercore Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evercore Partners has no effect on the direction of LPL Financial i.e., LPL Financial and Evercore Partners go up and down completely randomly.

Pair Corralation between LPL Financial and Evercore Partners

Given the investment horizon of 90 days LPL Financial Holdings is expected to generate 0.8 times more return on investment than Evercore Partners. However, LPL Financial Holdings is 1.25 times less risky than Evercore Partners. It trades about 0.3 of its potential returns per unit of risk. Evercore Partners is currently generating about 0.17 per unit of risk. If you would invest  21,950  in LPL Financial Holdings on August 31, 2024 and sell it today you would earn a total of  10,622  from holding LPL Financial Holdings or generate 48.39% return on investment over 90 days.

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

LPL Financial Holdings  vs.  Evercore Partners

LPL Financial Holdings

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, LPL Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Evercore Partners

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evercore Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Evercore Partners reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LPL Financial and Evercore Partners

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

The idea behind LPL Financial Holdings and Evercore Partners 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.