Correlation Between Lsv Value and Lsv Emerging

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

By analyzing existing cross correlation between Lsv Value Equity and Lsv Emerging Markets, you can compare the effects of market volatilities on Lsv Value and Lsv Emerging 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 Lsv Value with a short position of Lsv Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lsv Value and Lsv Emerging.

Diversification Opportunities for Lsv Value and Lsv Emerging

0.94

Correlation Coefficient

Lsv Value  Lsv Emerging

Almost no diversification

The 3 months correlation between Lsv and Lsv is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Value Equity and Lsv Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsv Emerging Markets and Lsv Value 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 Lsv Value Equity are associated (or correlated) with Lsv Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsv Emerging Markets has no effect on the direction of Lsv Value i.e., Lsv Value and Lsv Emerging go up and down completely randomly.

Pair Corralation between Lsv Value and Lsv Emerging

Assuming the 90 days horizon Lsv Value is expected to generate 1.67 times less return on investment than Lsv Emerging. In addition to that, Lsv Value is 1.28 times more volatile than Lsv Emerging Markets. It trades about 0.11 of its total potential returns per unit of risk. Lsv Emerging Markets is currently generating about 0.23 per unit of volatility. If you would invest  1,259  in Lsv Emerging Markets on May 5, 2025 and sell it today you would earn a total of  129.00  from holding Lsv Emerging Markets or generate 10.25% return on investment over 90 days.

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

Lsv Value Equity  vs.  Lsv Emerging Markets

Lsv Value Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lsv Value Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Lsv Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lsv Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lsv Emerging Markets are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lsv Emerging may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Lsv Value and Lsv Emerging

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

The idea behind Lsv Value Equity and Lsv Emerging 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.