Correlation Between Aldel Financial and Life Time

Can any of the company-specific risk be diversified away by investing in both Aldel Financial and Life Time 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 Aldel Financial and Life Time into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aldel Financial II and Life Time Group, you can compare the effects of market volatilities on Aldel Financial and Life Time 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 Aldel Financial with a short position of Life Time. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Life Time.

Diversification Opportunities for Aldel Financial and Life Time

0.56

Correlation Coefficient

Aldel Financial  Life Time

Very weak diversification

The 3 months correlation between Aldel and Life is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Life Time Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Time Group and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Life Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Time Group has no effect on the direction of Aldel Financial i.e., Aldel Financial and Life Time go up and down completely randomly.

Pair Corralation between Aldel Financial and Life Time

Given the investment horizon of 90 days Aldel Financial is expected to generate 20.46 times less return on investment than Life Time. But when comparing it to its historical volatility, Aldel Financial II is 20.25 times less risky than Life Time. It trades about 0.25 of its potential returns per unit of risk. Life Time Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,206  in Life Time Group on December 18, 2024 and sell it today you would earn a total of  827.00  from holding Life Time Group or generate 37.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Aldel Financial II  vs.  Life Time Group

Aldel Financial II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Life Time Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Life Time demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aldel Financial and Life Time

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

The idea behind Aldel Financial II and Life Time Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.