Correlation Between Life Insurance and Globalfoundries

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

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

Diversification Opportunities for Life Insurance and Globalfoundries

0.54

Correlation Coefficient

Life Insurance  Globalfoundries

Very weak diversification

The 3 months correlation between Life and Globalfoundries is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Life Insurance 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 Insurance are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Life Insurance i.e., Life Insurance and Globalfoundries go up and down completely randomly.

Pair Corralation between Life Insurance and Globalfoundries

Assuming the 90 days horizon Life Insurance is expected to under-perform the Globalfoundries. In addition to that, Life Insurance is 1.85 times more volatile than Globalfoundries. It trades about -0.18 of its total potential returns per unit of risk. Globalfoundries is currently generating about -0.07 per unit of volatility. If you would invest  4,403  in Globalfoundries on December 22, 2024 and sell it today you would lose (540.00) from holding Globalfoundries or give up 12.26% of portfolio value over 90 days.

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

Life Insurance  vs.  Globalfoundries

Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Globalfoundries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Life Insurance and Globalfoundries

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

The idea behind Life Insurance and Globalfoundries 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.