Correlation Between LBA and Highstreet
Can any of the company-specific risk be diversified away by investing in both LBA and Highstreet 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 Highstreet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LBA and Highstreet, you can compare the effects of market volatilities on LBA and Highstreet 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 Highstreet. Check out your portfolio center. Please also check ongoing floating volatility patterns of LBA and Highstreet.
Diversification Opportunities for LBA and Highstreet
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between LBA and Highstreet is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding LBA and Highstreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highstreet 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 Highstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highstreet has no effect on the direction of LBA i.e., LBA and Highstreet go up and down completely randomly.
Pair Corralation between LBA and Highstreet
Assuming the 90 days trading horizon LBA is expected to generate 1.84 times more return on investment than Highstreet. However, LBA is 1.84 times more volatile than Highstreet. It trades about 0.04 of its potential returns per unit of risk. Highstreet is currently generating about 0.05 per unit of risk. If you would invest 0.12 in LBA on August 23, 2024 and sell it today you would lose (0.10) from holding LBA or give up 80.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LBA vs. Highstreet
Performance |
| Timeline |
| LBA |
| Highstreet |
LBA and Highstreet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LBA and Highstreet
The main advantage of trading using opposite LBA and Highstreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LBA position performs unexpectedly, Highstreet 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 Highstreet will offset losses from the drop in Highstreet's long position.The idea behind LBA and Highstreet 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |