Correlation Between Dividend Select and Life Banc

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

By analyzing existing cross correlation between Dividend Select 15 and Life Banc Split, you can compare the effects of market volatilities on Dividend Select and Life Banc 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 Dividend Select with a short position of Life Banc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Select and Life Banc.

Diversification Opportunities for Dividend Select and Life Banc

0.6

Correlation Coefficient

Dividend Select  Life Banc

Poor diversification

The 3 months correlation between Dividend and Life is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Select 15 and Life Banc Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Banc Split and Dividend Select 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 Dividend Select 15 are associated (or correlated) with Life Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Banc Split has no effect on the direction of Dividend Select i.e., Dividend Select and Life Banc go up and down completely randomly.

Pair Corralation between Dividend Select and Life Banc

Assuming the 90 days horizon Dividend Select 15 is expected to under-perform the Life Banc. But the stock apears to be less risky and, when comparing its historical volatility, Dividend Select 15 is 2.07 times less risky than Life Banc. The stock trades about -0.11 of its potential returns per unit of risk. The Life Banc Split is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  887.00  in Life Banc Split on December 29, 2024 and sell it today you would lose (46.00) from holding Life Banc Split or give up 5.19% of portfolio value over 90 days.

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

Dividend Select 15  vs.  Life Banc Split

Dividend Select 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dividend Select 15 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dividend Select is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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. In spite of very healthy basic indicators, Life Banc is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dividend Select and Life Banc

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

The idea behind Dividend Select 15 and Life Banc Split 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..