Correlation Between LIFENET INSURANCE and MULTI-CHEM

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

By analyzing existing cross correlation between LIFENET INSURANCE CO and MULTI CHEM LTD, you can compare the effects of market volatilities on LIFENET INSURANCE and MULTI-CHEM 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 LIFENET INSURANCE with a short position of MULTI-CHEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFENET INSURANCE and MULTI-CHEM.

Diversification Opportunities for LIFENET INSURANCE and MULTI-CHEM

-0.24

Correlation Coefficient

LIFENET INSURANCE  MULTI-CHEM

Very good diversification

The 3 months correlation between LIFENET and MULTI-CHEM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding LIFENET INSURANCE CO and MULTI CHEM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MULTI CHEM LTD and LIFENET INSURANCE 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 LIFENET INSURANCE CO are associated (or correlated) with MULTI-CHEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MULTI CHEM LTD has no effect on the direction of LIFENET INSURANCE i.e., LIFENET INSURANCE and MULTI-CHEM go up and down completely randomly.

Pair Corralation between LIFENET INSURANCE and MULTI-CHEM

Assuming the 90 days horizon LIFENET INSURANCE CO is expected to under-perform the MULTI-CHEM. But the stock apears to be less risky and, when comparing its historical volatility, LIFENET INSURANCE CO is 1.75 times less risky than MULTI-CHEM. The stock trades about -0.06 of its potential returns per unit of risk. The MULTI CHEM LTD is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  185.00  in MULTI CHEM LTD on December 22, 2024 and sell it today you would earn a total of  27.00  from holding MULTI CHEM LTD or generate 14.59% return on investment over 90 days.

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

LIFENET INSURANCE CO  vs.  MULTI CHEM LTD

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

MULTI CHEM LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI CHEM LTD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MULTI-CHEM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIFENET INSURANCE and MULTI-CHEM

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

The idea behind LIFENET INSURANCE CO and MULTI CHEM 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.