Correlation Between LBA and BLZ

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

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

Diversification Opportunities for LBA and BLZ

0.38

Correlation Coefficient

LBA  BLZ

Weak diversification

The 3 months correlation between LBA and BLZ is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding LBA and BLZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLZ 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 BLZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLZ has no effect on the direction of LBA i.e., LBA and BLZ go up and down completely randomly.

Pair Corralation between LBA and BLZ

Assuming the 90 days trading horizon LBA is expected to generate 26.83 times less return on investment than BLZ. But when comparing it to its historical volatility, LBA is 1.02 times less risky than BLZ. It trades about 0.0 of its potential returns per unit of risk. BLZ is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.28  in BLZ on February 9, 2025 and sell it today you would lose (0.31) from holding BLZ or give up 7.24% of portfolio value over 90 days.

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

LBA  vs.  BLZ

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.

BLZ

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BLZ are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BLZ exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LBA and BLZ

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

The idea behind LBA and BLZ 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 Commodity Directory module to find actively traded commodities issued by global exchanges.