Correlation Between LIFE + and NORTHERN OCEAN

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

By analyzing existing cross correlation between LIFE BANC SPLIT and NORTHERN OCEAN LTD, you can compare the effects of market volatilities on LIFE + and NORTHERN OCEAN 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 LIFE + with a short position of NORTHERN OCEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE + and NORTHERN OCEAN.

Diversification Opportunities for LIFE + and NORTHERN OCEAN

0.81

Correlation Coefficient

LIFE +  NORTHERN OCEAN

Very poor diversification

The 3 months correlation between LIFE and NORTHERN is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and NORTHERN OCEAN LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN OCEAN LTD and LIFE + 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 LIFE BANC SPLIT are associated (or correlated) with NORTHERN OCEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHERN OCEAN LTD has no effect on the direction of LIFE + i.e., LIFE + and NORTHERN OCEAN go up and down completely randomly.

Pair Corralation between LIFE + and NORTHERN OCEAN

Assuming the 90 days horizon LIFE BANC SPLIT is expected to generate 0.96 times more return on investment than NORTHERN OCEAN. However, LIFE BANC SPLIT is 1.04 times less risky than NORTHERN OCEAN. It trades about 0.04 of its potential returns per unit of risk. NORTHERN OCEAN LTD is currently generating about -0.01 per unit of risk. If you would invest  437.00  in LIFE BANC SPLIT on September 2, 2024 and sell it today you would earn a total of  203.00  from holding LIFE BANC SPLIT or generate 46.45% return on investment over 90 days.

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

LIFE BANC SPLIT  vs.  NORTHERN OCEAN LTD

LIFE BANC SPLIT

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LIFE BANC SPLIT are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, LIFE + reported solid returns over the last few months and may actually be approaching a breakup point.

NORTHERN OCEAN LTD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NORTHERN OCEAN LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NORTHERN OCEAN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIFE + and NORTHERN OCEAN

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

The idea behind LIFE BANC SPLIT and NORTHERN OCEAN LTD 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.