Correlation Between Basler Kantonalbank and Liechtensteinische

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

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

Diversification Opportunities for Basler Kantonalbank and Liechtensteinische

0.16

Correlation Coefficient

Basler Kantonalbank  Liechtensteinische

Average diversification

The 3 months correlation between Basler and Liechtensteinische is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Basler Kantonalbank and Liechtensteinische Landesbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liechtensteinische and Basler Kantonalbank 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 Basler Kantonalbank are associated (or correlated) with Liechtensteinische. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liechtensteinische has no effect on the direction of Basler Kantonalbank i.e., Basler Kantonalbank and Liechtensteinische go up and down completely randomly.

Pair Corralation between Basler Kantonalbank and Liechtensteinische

Assuming the 90 days trading horizon Basler Kantonalbank is expected to generate 1.04 times more return on investment than Liechtensteinische. However, Basler Kantonalbank is 1.04 times more volatile than Liechtensteinische Landesbank AG. It trades about 0.36 of its potential returns per unit of risk. Liechtensteinische Landesbank AG is currently generating about 0.27 per unit of risk. If you would invest  6,820  in Basler Kantonalbank on October 17, 2024 and sell it today you would earn a total of  360.00  from holding Basler Kantonalbank or generate 5.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

Basler Kantonalbank  vs.  Liechtensteinische Landesbank

Basler Kantonalbank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Basler Kantonalbank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Basler Kantonalbank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Liechtensteinische

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liechtensteinische Landesbank AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liechtensteinische is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Basler Kantonalbank and Liechtensteinische

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

The idea behind Basler Kantonalbank and Liechtensteinische Landesbank AG 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.