Correlation Between Yield Guild and LBA

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Can any of the company-specific risk be diversified away by investing in both Yield Guild and LBA 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 Yield Guild and LBA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yield Guild Games and LBA, you can compare the effects of market volatilities on Yield Guild and LBA 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 Yield Guild with a short position of LBA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yield Guild and LBA.

Diversification Opportunities for Yield Guild and LBA

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Yield and LBA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Yield Guild Games and LBA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBA and Yield Guild 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 Yield Guild Games are associated (or correlated) with LBA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBA has no effect on the direction of Yield Guild i.e., Yield Guild and LBA go up and down completely randomly.

Pair Corralation between Yield Guild and LBA

Assuming the 90 days trading horizon Yield Guild is expected to generate 6.81 times less return on investment than LBA. But when comparing it to its historical volatility, Yield Guild Games is 6.34 times less risky than LBA. It trades about 0.05 of its potential returns per unit of risk. LBA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.15  in LBA on December 29, 2023 and sell it today you would lose (0.09) from holding LBA or give up 59.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Yield Guild Games  vs.  LBA

 Performance 
       Timeline  
Yield Guild Games 

Risk-Adjusted Performance

16 of 100

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

Risk-Adjusted Performance

9 of 100

 
Low
 
High
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.

Yield Guild and LBA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Yield Guild and LBA

The main advantage of trading using opposite Yield Guild and LBA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yield Guild position performs unexpectedly, LBA 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 LBA will offset losses from the drop in LBA's long position.
The idea behind Yield Guild Games and LBA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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