Correlation Between LB Investment and KTB Investment

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

By analyzing existing cross correlation between LB Investment and KTB Investment Securities, you can compare the effects of market volatilities on LB Investment and KTB Investment 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 LB Investment with a short position of KTB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Investment and KTB Investment.

Diversification Opportunities for LB Investment and KTB Investment

0.8

Correlation Coefficient

LB Investment  KTB Investment

Very poor diversification

The 3 months correlation between 309960 and KTB is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and KTB Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTB Investment Securities and LB Investment 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 LB Investment are associated (or correlated) with KTB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTB Investment Securities has no effect on the direction of LB Investment i.e., LB Investment and KTB Investment go up and down completely randomly.

Pair Corralation between LB Investment and KTB Investment

Assuming the 90 days trading horizon LB Investment is expected to under-perform the KTB Investment. In addition to that, LB Investment is 1.95 times more volatile than KTB Investment Securities. It trades about -0.14 of its total potential returns per unit of risk. KTB Investment Securities is currently generating about 0.06 per unit of volatility. If you would invest  255,500  in KTB Investment Securities on September 16, 2024 and sell it today you would earn a total of  5,000  from holding KTB Investment Securities or generate 1.96% return on investment over 90 days.

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

LB Investment  vs.  KTB Investment Securities

LB Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LB Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KTB Investment Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KTB Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LB Investment and KTB Investment

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

The idea behind LB Investment and KTB Investment Securities 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.