Correlation Between LIFE + and UFP Industries
Can any of the company-specific risk be diversified away by investing in both LIFE + and UFP Industries 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 UFP Industries 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 UFP Industries, you can compare the effects of market volatilities on LIFE + and UFP Industries 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 UFP Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE + and UFP Industries.
Diversification Opportunities for LIFE + and UFP Industries
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LIFE and UFP is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and UFP Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFP Industries 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 UFP Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFP Industries has no effect on the direction of LIFE + i.e., LIFE + and UFP Industries go up and down completely randomly.
Pair Corralation between LIFE + and UFP Industries
Assuming the 90 days horizon LIFE BANC SPLIT is expected to generate 1.84 times more return on investment than UFP Industries. However, LIFE + is 1.84 times more volatile than UFP Industries. It trades about -0.22 of its potential returns per unit of risk. UFP Industries is currently generating about -0.41 per unit of risk. If you would invest 663.00 in LIFE BANC SPLIT on September 24, 2024 and sell it today you would lose (98.00) from holding LIFE BANC SPLIT or give up 14.78% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
LIFE BANC SPLIT vs. UFP Industries
Performance |
Timeline |
LIFE BANC SPLIT |
UFP Industries |
LIFE + and UFP Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LIFE + and UFP Industries
The main advantage of trading using opposite LIFE + and UFP Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFE + position performs unexpectedly, UFP Industries 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 UFP Industries will offset losses from the drop in UFP Industries' long position.The idea behind LIFE BANC SPLIT and UFP Industries 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.UFP Industries vs. Svenska Cellulosa Aktiebolaget | UFP Industries vs. SVENSKA CELLULO B | UFP Industries vs. Svenska Cellulosa Aktiebolaget | UFP Industries vs. West Fraser Timber |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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