Correlation Between KEY and LBA

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

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

Diversification Opportunities for KEY and LBA

0.5

Correlation Coefficient

KEY  LBA

Very weak diversification

The 3 months correlation between KEY and LBA is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding KEY and LBA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBA and KEY 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 KEY 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 KEY i.e., KEY and LBA go up and down completely randomly.

Pair Corralation between KEY and LBA

Assuming the 90 days trading horizon KEY is expected to under-perform the LBA. But the crypto coin apears to be less risky and, when comparing its historical volatility, KEY is 1.16 times less risky than LBA. The crypto coin trades about -0.06 of its potential returns per unit of risk. The LBA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  0.02  in LBA on December 28, 2024 and sell it today you would lose (0.01) from holding LBA or give up 36.53% of portfolio value over 90 days.

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

KEY  vs.  LBA

KEY

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for KEY shareholders.

LBA

Risk-Adjusted Performance

Very Weak

Over the last 90 days LBA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for LBA shareholders.

Pair Trading with KEY and LBA

The main advantage of trading using opposite KEY and LBA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEY 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 KEY 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.