Correlation Between LBA and Puffer

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

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

Diversification Opportunities for LBA and Puffer

0.23

Correlation Coefficient

LBA  Puffer

Modest diversification

The 3 months correlation between LBA and Puffer is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding LBA and Puffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puffer 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 Puffer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puffer has no effect on the direction of LBA i.e., LBA and Puffer go up and down completely randomly.

Pair Corralation between LBA and Puffer

Assuming the 90 days trading horizon LBA is expected to generate 0.66 times more return on investment than Puffer. However, LBA is 1.52 times less risky than Puffer. It trades about 0.21 of its potential returns per unit of risk. Puffer is currently generating about 0.0 per unit of risk. If you would invest  0.01  in LBA on July 11, 2025 and sell it today you would earn a total of  0.01  from holding LBA or generate 63.27% return on investment over 90 days.

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

LBA  vs.  Puffer

LBA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LBA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LBA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Puffer

Risk-Adjusted Performance

Weakest

Over the last 90 days Puffer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Puffer is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LBA and Puffer

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

The idea behind LBA and Puffer 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.