Correlation Between Finance Of and LM Funding
Can any of the company-specific risk be diversified away by investing in both Finance Of and LM Funding 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 Finance Of and LM Funding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finance of America and LM Funding America, you can compare the effects of market volatilities on Finance Of and LM Funding 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 Finance Of with a short position of LM Funding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finance Of and LM Funding.
Diversification Opportunities for Finance Of and LM Funding
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Finance and LMFA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Finance of America and LM Funding America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LM Funding America and Finance Of 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 Finance of America are associated (or correlated) with LM Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LM Funding America has no effect on the direction of Finance Of i.e., Finance Of and LM Funding go up and down completely randomly.
Pair Corralation between Finance Of and LM Funding
Considering the 90-day investment horizon Finance of America is expected to under-perform the LM Funding. But the stock apears to be less risky and, when comparing its historical volatility, Finance of America is 1.27 times less risky than LM Funding. The stock trades about -0.14 of its potential returns per unit of risk. The LM Funding America is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 286.00 in LM Funding America on February 4, 2024 and sell it today you would lose (48.00) from holding LM Funding America or give up 16.78% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Finance of America vs. LM Funding America
Performance |
Timeline |
Finance of America |
LM Funding America |
Finance Of and LM Funding Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Finance Of and LM Funding
The main advantage of trading using opposite Finance Of and LM Funding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finance Of position performs unexpectedly, LM Funding 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 LM Funding will offset losses from the drop in LM Funding's long position.Finance Of vs. Mercurity Fintech Holding | Finance Of vs. Zhong Yang Financial | Finance Of vs. SAITECH Global | Finance Of vs. Applied Blockchain |
LM Funding vs. Consumer Portfolio Services | LM Funding vs. Atlanticus Holdings Corp | LM Funding vs. Nelnet Inc | LM Funding vs. Senmiao Technology |
Check out your portfolio center.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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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