Correlation Between LBA and MNW

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

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

Diversification Opportunities for LBA and MNW

-0.55

Correlation Coefficient

LBA  MNW

Excellent diversification

The 3 months correlation between LBA and MNW is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding LBA and MNW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MNW and LBA 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 LBA are associated (or correlated) with MNW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MNW has no effect on the direction of LBA i.e., LBA and MNW go up and down completely randomly.

Pair Corralation between LBA and MNW

Assuming the 90 days trading horizon LBA is expected to under-perform the MNW. But the crypto coin apears to be less risky and, when comparing its historical volatility, LBA is 13.03 times less risky than MNW. The crypto coin trades about -0.01 of its potential returns per unit of risk. The MNW is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  302.00  in MNW on November 19, 2024 and sell it today you would lose (280.00) from holding MNW or give up 92.72% of portfolio value over 90 days.

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

LBA  vs.  MNW

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 rather sound basic indicators, LBA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MNW

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MNW are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MNW exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LBA and MNW

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

The idea behind LBA and MNW 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.