Correlation Between LB Investment and KCI

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

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

Diversification Opportunities for LB Investment and KCI

0.81

Correlation Coefficient

LB Investment  KCI

Very poor diversification

The 3 months correlation between 309960 and KCI is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and KCI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI Limited 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 KCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI Limited has no effect on the direction of LB Investment i.e., LB Investment and KCI go up and down completely randomly.

Pair Corralation between LB Investment and KCI

Assuming the 90 days trading horizon LB Investment is expected to under-perform the KCI. In addition to that, LB Investment is 1.3 times more volatile than KCI Limited. It trades about -0.15 of its total potential returns per unit of risk. KCI Limited is currently generating about -0.09 per unit of volatility. If you would invest  765,000  in KCI Limited on September 21, 2024 and sell it today you would lose (77,000) from holding KCI Limited or give up 10.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

LB Investment  vs.  KCI Limited

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.

KCI Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCI Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LB Investment and KCI

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

The idea behind LB Investment and KCI Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.