Correlation Between LBA and Centrifuge
Can any of the company-specific risk be diversified away by investing in both LBA and Centrifuge 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 LBA and Centrifuge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LBA and Centrifuge, you can compare the effects of market volatilities on LBA and Centrifuge 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 LBA with a short position of Centrifuge. Check out your portfolio center. Please also check ongoing floating volatility patterns of LBA and Centrifuge.
Diversification Opportunities for LBA and Centrifuge
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between LBA and Centrifuge is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding LBA and Centrifuge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrifuge and LBA 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 LBA are associated (or correlated) with Centrifuge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrifuge has no effect on the direction of LBA i.e., LBA and Centrifuge go up and down completely randomly.
Pair Corralation between LBA and Centrifuge
Assuming the 90 days trading horizon LBA is expected to generate 1.37 times less return on investment than Centrifuge. In addition to that, LBA is 1.93 times more volatile than Centrifuge. It trades about 0.08 of its total potential returns per unit of risk. Centrifuge is currently generating about 0.21 per unit of volatility. If you would invest 30.00 in Centrifuge on August 23, 2024 and sell it today you would earn a total of 9.00 from holding Centrifuge or generate 30.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LBA vs. Centrifuge
Performance |
| Timeline |
| LBA |
| Centrifuge |
LBA and Centrifuge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LBA and Centrifuge
The main advantage of trading using opposite LBA and Centrifuge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LBA position performs unexpectedly, Centrifuge 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 Centrifuge will offset losses from the drop in Centrifuge's long position.The idea behind LBA and Centrifuge 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |