Correlation Between Fixed Income and Lifex Income

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

By analyzing existing cross correlation between Fixed Income Shares and Lifex Income, you can compare the effects of market volatilities on Fixed Income and Lifex Income 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 Fixed Income with a short position of Lifex Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and Lifex Income.

Diversification Opportunities for Fixed Income and Lifex Income

-0.09

Correlation Coefficient

Fixed Income  Lifex Income

Good diversification

The 3 months correlation between Fixed and Lifex is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fixed Income Shares and Lifex Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Income and Fixed Income 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 Fixed Income Shares are associated (or correlated) with Lifex Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifex Income has no effect on the direction of Fixed Income i.e., Fixed Income and Lifex Income go up and down completely randomly.

Pair Corralation between Fixed Income and Lifex Income

Assuming the 90 days horizon Fixed Income is expected to generate 23.73 times less return on investment than Lifex Income. But when comparing it to its historical volatility, Fixed Income Shares is 1.44 times less risky than Lifex Income. It trades about 0.01 of its potential returns per unit of risk. Lifex Income is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,852  in Lifex Income on October 22, 2024 and sell it today you would earn a total of  37.00  from holding Lifex Income or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.97%
Values	Daily Returns

Fixed Income Shares  vs.  Lifex Income

Fixed Income Shares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fixed Income Shares has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Fixed Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lifex Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifex Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Lifex Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fixed Income and Lifex Income

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

The idea behind Fixed Income Shares and Lifex Income 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.