Correlation Between LPL Financial and Tradeweb Markets

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

Diversification Opportunities for LPL Financial and Tradeweb Markets

0.46

Correlation Coefficient

LPL Financial  Tradeweb Markets

Very weak diversification

The 3 months correlation between LPL and Tradeweb is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets 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 Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of LPL Financial i.e., LPL Financial and Tradeweb Markets go up and down completely randomly.

Pair Corralation between LPL Financial and Tradeweb Markets

Given the investment horizon of 90 days LPL Financial is expected to generate 3.8 times less return on investment than Tradeweb Markets. But when comparing it to its historical volatility, LPL Financial Holdings is 1.28 times less risky than Tradeweb Markets. It trades about 0.12 of its potential returns per unit of risk. Tradeweb Markets is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  10,065  in Tradeweb Markets on February 16, 2024 and sell it today you would earn a total of  1,201  from holding Tradeweb Markets or generate 11.93% return on investment over 90 days.

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

LPL Financial Holdings  vs.  Tradeweb Markets

LPL Financial Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, LPL Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tradeweb Markets

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with LPL Financial and Tradeweb Markets

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

The idea behind LPL Financial Holdings and Tradeweb Markets 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.