Correlation Between Locorr Market and Locorr Hedged

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

By analyzing existing cross correlation between Locorr Market Trend and Locorr Hedged Core, you can compare the effects of market volatilities on Locorr Market and Locorr Hedged 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 Locorr Market with a short position of Locorr Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locorr Market and Locorr Hedged.

Diversification Opportunities for Locorr Market and Locorr Hedged

0.84

Correlation Coefficient

Locorr Market  Locorr Hedged

Very poor diversification

The 3 months correlation between Locorr and Locorr is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Locorr Market Trend and Locorr Hedged Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Hedged Core and Locorr Market 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 Locorr Market Trend are associated (or correlated) with Locorr Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Hedged Core has no effect on the direction of Locorr Market i.e., Locorr Market and Locorr Hedged go up and down completely randomly.

Pair Corralation between Locorr Market and Locorr Hedged

Assuming the 90 days horizon Locorr Market Trend is expected to under-perform the Locorr Hedged. In addition to that, Locorr Market is 1.85 times more volatile than Locorr Hedged Core. It trades about -0.2 of its total potential returns per unit of risk. Locorr Hedged Core is currently generating about -0.05 per unit of volatility. If you would invest  954.00  in Locorr Hedged Core on February 3, 2025 and sell it today you would lose (12.00) from holding Locorr Hedged Core or give up 1.26% of portfolio value over 90 days.

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

Locorr Market Trend  vs.  Locorr Hedged Core

Locorr Market Trend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Locorr Market Trend has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Locorr Hedged Core

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Locorr Market and Locorr Hedged

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

The idea behind Locorr Market Trend and Locorr Hedged Core 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.