Correlation Between Liechtensteinische and Luzerner Kantonalbank

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

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

Diversification Opportunities for Liechtensteinische and Luzerner Kantonalbank

-0.31

Correlation Coefficient

Liechtensteinische  Luzerner Kantonalbank

Very good diversification

The 3 months correlation between Liechtensteinische and Luzerner is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Liechtensteinische Landesbank and Luzerner Kantonalbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luzerner Kantonalbank and Liechtensteinische 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 Liechtensteinische Landesbank AG are associated (or correlated) with Luzerner Kantonalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luzerner Kantonalbank has no effect on the direction of Liechtensteinische i.e., Liechtensteinische and Luzerner Kantonalbank go up and down completely randomly.

Pair Corralation between Liechtensteinische and Luzerner Kantonalbank

Assuming the 90 days trading horizon Liechtensteinische Landesbank AG is expected to under-perform the Luzerner Kantonalbank. In addition to that, Liechtensteinische is 1.02 times more volatile than Luzerner Kantonalbank AG. It trades about -0.06 of its total potential returns per unit of risk. Luzerner Kantonalbank AG is currently generating about 0.08 per unit of volatility. If you would invest  6,170  in Luzerner Kantonalbank AG on September 12, 2024 and sell it today you would earn a total of  240.00  from holding Luzerner Kantonalbank AG or generate 3.89% return on investment over 90 days.

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

Liechtensteinische Landesbank   vs.  Luzerner Kantonalbank AG

Liechtensteinische

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liechtensteinische Landesbank AG has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Luzerner Kantonalbank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Luzerner Kantonalbank AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Luzerner Kantonalbank 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 Liechtensteinische and Luzerner Kantonalbank

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

The idea behind Liechtensteinische Landesbank AG and Luzerner Kantonalbank 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.