Correlation Between Habitat Ii and LIFE CAPITAL

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

By analyzing existing cross correlation between Habitat Ii and LIFE CAPITAL PARTNERS, you can compare the effects of market volatilities on Habitat Ii and LIFE CAPITAL 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 Habitat Ii with a short position of LIFE CAPITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Habitat Ii and LIFE CAPITAL.

Diversification Opportunities for Habitat Ii and LIFE CAPITAL

0.95

Correlation Coefficient

Habitat Ii  LIFE CAPITAL

Almost no diversification

The 3 months correlation between Habitat and LIFE is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Habitat Ii and LIFE CAPITAL PARTNERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFE CAPITAL PARTNERS and Habitat Ii 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 Habitat Ii are associated (or correlated) with LIFE CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFE CAPITAL PARTNERS has no effect on the direction of Habitat Ii i.e., Habitat Ii and LIFE CAPITAL go up and down completely randomly.

Pair Corralation between Habitat Ii and LIFE CAPITAL

Assuming the 90 days trading horizon Habitat Ii is expected to under-perform the LIFE CAPITAL. But the fund apears to be less risky and, when comparing its historical volatility, Habitat Ii is 1.65 times less risky than LIFE CAPITAL. The fund trades about -0.35 of its potential returns per unit of risk. The LIFE CAPITAL PARTNERS is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  1,029  in LIFE CAPITAL PARTNERS on August 31, 2024 and sell it today you would lose (102.00) from holding LIFE CAPITAL PARTNERS or give up 9.91% of portfolio value over 90 days.

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

Habitat Ii   vs.  LIFE CAPITAL PARTNERS

Habitat Ii

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Habitat Ii has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

LIFE CAPITAL PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LIFE CAPITAL PARTNERS has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Habitat Ii and LIFE CAPITAL

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

The idea behind Habitat Ii and LIFE CAPITAL PARTNERS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.