Correlation Between LBA and HIT

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

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

Diversification Opportunities for LBA and HIT

0.41

Correlation Coefficient

LBA  HIT

Very weak diversification

The 3 months correlation between LBA and HIT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LBA and HIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HIT 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 HIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HIT has no effect on the direction of LBA i.e., LBA and HIT go up and down completely randomly.

Pair Corralation between LBA and HIT

Assuming the 90 days trading horizon LBA is expected to under-perform the HIT. But the crypto coin apears to be less risky and, when comparing its historical volatility, LBA is 2.03 times less risky than HIT. The crypto coin trades about -0.08 of its potential returns per unit of risk. The HIT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.00  in HIT on February 11, 2025 and sell it today you would lose  0.00  from holding HIT or give up 40.0% of portfolio value over 90 days.

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

LBA  vs.  HIT

LBA

Risk-Adjusted Performance

Weak

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

HIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HIT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LBA and HIT

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

The idea behind LBA and HIT 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.