Correlation Between HOML and LBDC

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

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

Diversification Opportunities for HOML and LBDC

0.0

Correlation Coefficient

HOML  LBDC

Pay attention - limited upside

The 3 months correlation between HOML and LBDC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HOML and LBDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBDC and HOML 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 HOML are associated (or correlated) with LBDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBDC has no effect on the direction of HOML i.e., HOML and LBDC go up and down completely randomly.

Pair Corralation between HOML and LBDC

If you would invest (100.00) in LBDC on February 5, 2024 and sell it today you would earn a total of  100.00  from holding LBDC or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HOML  vs.  LBDC

HOML

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOML has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, HOML is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

LBDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LBDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, LBDC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HOML and LBDC

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

The idea behind HOML and LBDC 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.