Correlation Between IB Acquisition and Lifevantage

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

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

Diversification Opportunities for IB Acquisition and Lifevantage

0.85

Correlation Coefficient

IB Acquisition  Lifevantage

Very poor diversification

The 3 months correlation between IBAC and Lifevantage is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding IB Acquisition Corp and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage and IB Acquisition 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 IB Acquisition Corp are associated (or correlated) with Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of IB Acquisition i.e., IB Acquisition and Lifevantage go up and down completely randomly.

Pair Corralation between IB Acquisition and Lifevantage

Given the investment horizon of 90 days IB Acquisition is expected to generate 28.41 times less return on investment than Lifevantage. But when comparing it to its historical volatility, IB Acquisition Corp is 28.53 times less risky than Lifevantage. It trades about 0.25 of its potential returns per unit of risk. Lifevantage is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,364  in Lifevantage on September 17, 2024 and sell it today you would earn a total of  240.00  from holding Lifevantage or generate 17.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

IB Acquisition Corp  vs.  Lifevantage

IB Acquisition Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IB Acquisition Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IB Acquisition is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Lifevantage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IB Acquisition and Lifevantage

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

The idea behind IB Acquisition Corp and Lifevantage 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.