Correlation Between LIFE + and NEW WORLD

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

Diversification Opportunities for LIFE + and NEW WORLD

-0.43

Correlation Coefficient

LIFE +  NEW WORLD

Very good diversification

The 3 months correlation between LIFE and NEW is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and NEW WORLD DEVCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW WORLD DEVCO 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 NEW WORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW WORLD DEVCO has no effect on the direction of LIFE + i.e., LIFE + and NEW WORLD go up and down completely randomly.

Pair Corralation between LIFE + and NEW WORLD

Assuming the 90 days horizon LIFE BANC SPLIT is expected to under-perform the NEW WORLD. But the stock apears to be less risky and, when comparing its historical volatility, LIFE BANC SPLIT is 1.26 times less risky than NEW WORLD. The stock trades about -0.04 of its potential returns per unit of risk. The NEW WORLD DEVCO is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  63.00  in NEW WORLD DEVCO on December 25, 2024 and sell it today you would earn a total of  1.00  from holding NEW WORLD DEVCO or generate 1.59% 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.  NEW WORLD DEVCO

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NEW WORLD DEVCO

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEW WORLD DEVCO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, NEW WORLD is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LIFE + and NEW WORLD

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

The idea behind LIFE BANC SPLIT and NEW WORLD DEVCO 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.