Correlation Between NXS and LBA

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

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

Diversification Opportunities for NXS and LBA

0.33

Correlation Coefficient

NXS  LBA

Weak diversification

The 3 months correlation between NXS and LBA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding NXS and LBA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBA and NXS 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 NXS 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 NXS i.e., NXS and LBA go up and down completely randomly.

Pair Corralation between NXS and LBA

Assuming the 90 days trading horizon NXS is expected to generate 0.31 times more return on investment than LBA. However, NXS is 3.19 times less risky than LBA. It trades about -0.01 of its potential returns per unit of risk. LBA is currently generating about -0.07 per unit of risk. If you would invest  23.00  in NXS on November 27, 2024 and sell it today you would lose (1.00) from holding NXS or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

NXS  vs.  LBA

NXS

Risk-Adjusted Performance

Very Weak

Over the last 90 days NXS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NXS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the 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 unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for LBA shareholders.

Pair Trading with NXS and LBA

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

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.