Correlation Between LIFE Old and Lyra Therapeutics

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

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

Diversification Opportunities for LIFE Old and Lyra Therapeutics

0.13

Correlation Coefficient

LIFE Old  Lyra Therapeutics

Average diversification

The 3 months correlation between LIFE and Lyra is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding LIFE Old and Lyra Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyra Therapeutics and LIFE Old 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 Old are associated (or correlated) with Lyra Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyra Therapeutics has no effect on the direction of LIFE Old i.e., LIFE Old and Lyra Therapeutics go up and down completely randomly.

Pair Corralation between LIFE Old and Lyra Therapeutics

Given the investment horizon of 90 days LIFE Old is expected to under-perform the Lyra Therapeutics. In addition to that, LIFE Old is 1.01 times more volatile than Lyra Therapeutics. It trades about -0.04 of its total potential returns per unit of risk. Lyra Therapeutics is currently generating about -0.03 per unit of volatility. If you would invest  275.00  in Lyra Therapeutics on October 11, 2024 and sell it today you would lose (255.00) from holding Lyra Therapeutics or give up 92.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.56%
Values	Daily Returns

LIFE Old  vs.  Lyra Therapeutics

LIFE Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LIFE Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, LIFE Old is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Lyra Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyra Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lyra Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LIFE Old and Lyra Therapeutics

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

The idea behind LIFE Old and Lyra Therapeutics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.