Correlation Between Lazard Small and Lazard Equity

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

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

Diversification Opportunities for Lazard Small and Lazard Equity

0.73

Correlation Coefficient

Lazard Small  Lazard Equity

Poor diversification

The 3 months correlation between Lazard and Lazard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lazard Small Mid Cap and Lazard Equity Centrated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Equity Centrated and Lazard Small 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 Lazard Small Mid Cap are associated (or correlated) with Lazard Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Equity Centrated has no effect on the direction of Lazard Small i.e., Lazard Small and Lazard Equity go up and down completely randomly.

Pair Corralation between Lazard Small and Lazard Equity

Assuming the 90 days horizon Lazard Small Mid Cap is expected to generate 1.2 times more return on investment than Lazard Equity. However, Lazard Small is 1.2 times more volatile than Lazard Equity Centrated. It trades about 0.13 of its potential returns per unit of risk. Lazard Equity Centrated is currently generating about 0.08 per unit of risk. If you would invest  1,278  in Lazard Small Mid Cap on September 12, 2024 and sell it today you would earn a total of  122.00  from holding Lazard Small Mid Cap or generate 9.55% return on investment over 90 days.

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

Lazard Small Mid Cap  vs.  Lazard Equity Centrated

Lazard Small Mid

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lazard Small Mid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Lazard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lazard Equity Centrated

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lazard Equity Centrated are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Lazard Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lazard Small and Lazard Equity

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

The idea behind Lazard Small Mid Cap and Lazard Equity Centrated 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.