Correlation Between LIFE + and Bridgestone

Can any of the company-specific risk be diversified away by investing in both LIFE + and Bridgestone 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 Bridgestone 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 Bridgestone, you can compare the effects of market volatilities on LIFE + and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE + and Bridgestone.

Diversification Opportunities for LIFE + and Bridgestone

-0.51

Correlation Coefficient

LIFE +  Bridgestone

Excellent diversification

The 3 months correlation between LIFE and Bridgestone is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of LIFE + i.e., LIFE + and Bridgestone go up and down completely randomly.

Pair Corralation between LIFE + and Bridgestone

Assuming the 90 days horizon LIFE BANC SPLIT is expected to under-perform the Bridgestone. In addition to that, LIFE + is 1.8 times more volatile than Bridgestone. It trades about -0.02 of its total potential returns per unit of risk. Bridgestone is currently generating about 0.18 per unit of volatility. If you would invest  1,519  in Bridgestone on December 30, 2024 and sell it today you would earn a total of  301.00  from holding Bridgestone or generate 19.82% return on investment over 90 days.

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

LIFE BANC SPLIT  vs.  Bridgestone

LIFE BANC SPLIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFE BANC SPLIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LIFE + is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bridgestone

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgestone are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bridgestone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIFE + and Bridgestone

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

The idea behind LIFE BANC SPLIT and Bridgestone 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.