Correlation Between LB Investment and IM CoLtd

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

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

Diversification Opportunities for LB Investment and IM CoLtd

-0.39

Correlation Coefficient

LB Investment  IM CoLtd

Very good diversification

The 3 months correlation between 309960 and 101390 is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and IM CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IM CoLtd and LB Investment 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 LB Investment are associated (or correlated) with IM CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IM CoLtd has no effect on the direction of LB Investment i.e., LB Investment and IM CoLtd go up and down completely randomly.

Pair Corralation between LB Investment and IM CoLtd

Assuming the 90 days trading horizon LB Investment is expected to generate 0.49 times more return on investment than IM CoLtd. However, LB Investment is 2.04 times less risky than IM CoLtd. It trades about 0.08 of its potential returns per unit of risk. IM CoLtd is currently generating about -0.12 per unit of risk. If you would invest  304,500  in LB Investment on December 26, 2024 and sell it today you would earn a total of  56,000  from holding LB Investment or generate 18.39% return on investment over 90 days.

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

LB Investment  vs.  IM CoLtd

LB Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LB Investment are ranked lower than 6 (%) 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.

IM CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days IM CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LB Investment and IM CoLtd

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

The idea behind LB Investment and IM CoLtd 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.