Correlation Between LBA and Altlayer

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

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

Diversification Opportunities for LBA and Altlayer

0.57

Correlation Coefficient

LBA  Altlayer

Very weak diversification

The 3 months correlation between LBA and Altlayer is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding LBA and Altlayer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altlayer 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 Altlayer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altlayer has no effect on the direction of LBA i.e., LBA and Altlayer go up and down completely randomly.

Pair Corralation between LBA and Altlayer

Assuming the 90 days trading horizon LBA is expected to generate 1.6 times more return on investment than Altlayer. However, LBA is 1.6 times more volatile than Altlayer. It trades about 0.05 of its potential returns per unit of risk. Altlayer is currently generating about -0.22 per unit of risk. If you would invest  0.05  in LBA on January 30, 2024 and sell it today you would lose  0.00  from holding LBA or give up 0.76% of portfolio value over 90 days.

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

LBA  vs.  Altlayer

LBA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LBA are ranked lower than 9 (%) 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.

Altlayer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altlayer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Altlayer exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LBA and Altlayer

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

The idea behind LBA and Altlayer 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.