Correlation Between LBA and Tokocrypto

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

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

Diversification Opportunities for LBA and Tokocrypto

0.78

Correlation Coefficient

LBA  Tokocrypto

Poor diversification

The 3 months correlation between LBA and Tokocrypto is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding LBA and Tokocrypto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokocrypto 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 Tokocrypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokocrypto has no effect on the direction of LBA i.e., LBA and Tokocrypto go up and down completely randomly.

Pair Corralation between LBA and Tokocrypto

Assuming the 90 days trading horizon LBA is expected to generate 1.46 times more return on investment than Tokocrypto. However, LBA is 1.46 times more volatile than Tokocrypto. It trades about 0.07 of its potential returns per unit of risk. Tokocrypto is currently generating about -0.21 per unit of risk. If you would invest  0.05  in LBA on January 29, 2024 and sell it today you would earn a total of  0.00  from holding LBA or generate 5.5% return on investment over 90 days.

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

LBA  vs.  Tokocrypto

LBA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LBA are ranked lower than 8 (%) 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.

Tokocrypto

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tokocrypto are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tokocrypto exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LBA and Tokocrypto

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

The idea behind LBA and Tokocrypto 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.