Correlation Between LM Funding and Signal Advance

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

By analyzing existing cross correlation between LM Funding America and Signal Advance, you can compare the effects of market volatilities on LM Funding and Signal Advance 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 LM Funding with a short position of Signal Advance. Check out your portfolio center. Please also check ongoing floating volatility patterns of LM Funding and Signal Advance.

Diversification Opportunities for LM Funding and Signal Advance

0.06

Correlation Coefficient

LM Funding  Signal Advance

Significant diversification

The 3 months correlation between LMFA and Signal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LM Funding America and Signal Advance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signal Advance and LM Funding 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 LM Funding America are associated (or correlated) with Signal Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signal Advance has no effect on the direction of LM Funding i.e., LM Funding and Signal Advance go up and down completely randomly.

Pair Corralation between LM Funding and Signal Advance

Given the investment horizon of 90 days LM Funding is expected to generate 1.06 times less return on investment than Signal Advance. But when comparing it to its historical volatility, LM Funding America is 1.33 times less risky than Signal Advance. It trades about 0.09 of its potential returns per unit of risk. Signal Advance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Signal Advance on May 1, 2025 and sell it today you would lose (1.00) from holding Signal Advance or give up 5.26% of portfolio value over 90 days.

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

LM Funding America  vs.  Signal Advance

LM Funding America

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LM Funding America are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, LM Funding sustained solid returns over the last few months and may actually be approaching a breakup point.

Signal Advance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Signal Advance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Signal Advance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LM Funding and Signal Advance

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

The idea behind LM Funding America and Signal Advance 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.