Correlation Between T3 Entertainment and LB Investment

Can any of the company-specific risk be diversified away by investing in both T3 Entertainment and LB Investment 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 T3 Entertainment and LB Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T3 Entertainment Co and LB Investment, you can compare the effects of market volatilities on T3 Entertainment and LB Investment 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 T3 Entertainment with a short position of LB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of T3 Entertainment and LB Investment.

Diversification Opportunities for T3 Entertainment and LB Investment

0.24

Correlation Coefficient

T3 Entertainment  LB Investment

Modest diversification

The 3 months correlation between 204610 and 309960 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding T3 Entertainment Co and LB Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Investment and T3 Entertainment 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 T3 Entertainment Co are associated (or correlated) with LB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Investment has no effect on the direction of T3 Entertainment i.e., T3 Entertainment and LB Investment go up and down completely randomly.

Pair Corralation between T3 Entertainment and LB Investment

Assuming the 90 days trading horizon T3 Entertainment Co is expected to generate 0.6 times more return on investment than LB Investment. However, T3 Entertainment Co is 1.67 times less risky than LB Investment. It trades about 0.01 of its potential returns per unit of risk. LB Investment is currently generating about -0.02 per unit of risk. If you would invest  187,730  in T3 Entertainment Co on December 2, 2024 and sell it today you would lose (8,130) from holding T3 Entertainment Co or give up 4.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.51%
Values	Daily Returns

T3 Entertainment Co  vs.  LB Investment

T3 Entertainment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T3 Entertainment Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, T3 Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

LB Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LB Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LB Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T3 Entertainment and LB Investment

The main advantage of trading using opposite T3 Entertainment and LB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T3 Entertainment position performs unexpectedly, LB Investment 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 LB Investment will offset losses from the drop in LB Investment's long position.

The idea behind T3 Entertainment Co and LB Investment 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.