Correlation Between Lifevantage and Rocky Mountain

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

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

Diversification Opportunities for Lifevantage and Rocky Mountain

0.28

Correlation Coefficient

Lifevantage  Rocky Mountain

Modest diversification

The 3 months correlation between Lifevantage and Rocky is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lifevantage and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate and Lifevantage 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 Lifevantage are associated (or correlated) with Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Chocolate has no effect on the direction of Lifevantage i.e., Lifevantage and Rocky Mountain go up and down completely randomly.

Pair Corralation between Lifevantage and Rocky Mountain

Given the investment horizon of 90 days Lifevantage is expected to generate 1.87 times more return on investment than Rocky Mountain. However, Lifevantage is 1.87 times more volatile than Rocky Mountain Chocolate. It trades about 0.26 of its potential returns per unit of risk. Rocky Mountain Chocolate is currently generating about -0.09 per unit of risk. If you would invest  1,428  in Lifevantage on October 10, 2024 and sell it today you would earn a total of  569.00  from holding Lifevantage or generate 39.85% return on investment over 90 days.

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

Lifevantage  vs.  Rocky Mountain Chocolate

Lifevantage

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Rocky Mountain Chocolate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Chocolate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Rocky Mountain reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifevantage and Rocky Mountain

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

The idea behind Lifevantage and Rocky Mountain Chocolate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.