Correlation Between Kingsway Financial and Lmp Automotive

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

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

Diversification Opportunities for Kingsway Financial and Lmp Automotive

0.45

Correlation Coefficient

Kingsway Financial  Lmp Automotive

Very weak diversification

The 3 months correlation between Kingsway and Lmp is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kingsway Financial Services and Lmp Automotive Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lmp Automotive Holdings and Kingsway 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 Kingsway Financial Services are associated (or correlated) with Lmp Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lmp Automotive Holdings has no effect on the direction of Kingsway Financial i.e., Kingsway Financial and Lmp Automotive go up and down completely randomly.

Pair Corralation between Kingsway Financial and Lmp Automotive

Considering the 90-day investment horizon Kingsway Financial is expected to generate 3.75 times less return on investment than Lmp Automotive. But when comparing it to its historical volatility, Kingsway Financial Services is 1.68 times less risky than Lmp Automotive. It trades about 0.05 of its potential returns per unit of risk. Lmp Automotive Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  407.00  in Lmp Automotive Holdings on March 6, 2024 and sell it today you would earn a total of  293.00  from holding Lmp Automotive Holdings or generate 71.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	33.54%
Values	Daily Returns

Kingsway Financial Services  vs.  Lmp Automotive Holdings

Kingsway Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lmp Automotive Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lmp Automotive Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Lmp Automotive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kingsway Financial and Lmp Automotive

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

The idea behind Kingsway Financial Services and Lmp Automotive Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.