Correlation Between LIFE HEALTH and LIFE +

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

By analyzing existing cross correlation between LIFE HEALTH GRP and LIFE BANC SPLIT, you can compare the effects of market volatilities on LIFE HEALTH and LIFE + 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 LIFE HEALTH with a short position of LIFE +. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE HEALTH and LIFE +.

Diversification Opportunities for LIFE HEALTH and LIFE +

0.68

Correlation Coefficient

LIFE HEALTH  LIFE +

Poor diversification

The 3 months correlation between LIFE and LIFE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding LIFE HEALTH GRP 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 LIFE HEALTH 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 LIFE HEALTH GRP are associated (or correlated) with LIFE +. 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 LIFE HEALTH i.e., LIFE HEALTH and LIFE + go up and down completely randomly.

Pair Corralation between LIFE HEALTH and LIFE +

Assuming the 90 days trading horizon LIFE HEALTH GRP is expected to under-perform the LIFE +. But the stock apears to be less risky and, when comparing its historical volatility, LIFE HEALTH GRP is 1.34 times less risky than LIFE +. The stock trades about -0.1 of its potential returns per unit of risk. The LIFE BANC SPLIT is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  579.00  in LIFE BANC SPLIT on December 28, 2024 and sell it today you would lose (34.00) from holding LIFE BANC SPLIT or give up 5.87% of portfolio value over 90 days.

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

LIFE HEALTH GRP  vs.  LIFE BANC SPLIT

LIFE HEALTH GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFE HEALTH GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. Despite nearly stable basic indicators, LIFE + is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LIFE HEALTH and LIFE +

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

The idea behind LIFE HEALTH GRP 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.