Correlation Between Life Time and Aldel Financial

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

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

Diversification Opportunities for Life Time and Aldel Financial

0.56

Correlation Coefficient

Life Time  Aldel Financial

Very weak diversification

The 3 months correlation between Life and Aldel is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Aldel Financial II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldel Financial II and Life Time 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 Time Group are associated (or correlated) with Aldel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldel Financial II has no effect on the direction of Life Time i.e., Life Time and Aldel Financial go up and down completely randomly.

Pair Corralation between Life Time and Aldel Financial

Considering the 90-day investment horizon Life Time Group is expected to generate 20.25 times more return on investment than Aldel Financial. However, Life Time is 20.25 times more volatile than Aldel Financial II. It trades about 0.25 of its potential returns per unit of risk. Aldel Financial II is currently generating about 0.25 per unit of risk. If you would invest  2,206  in Life Time Group on December 18, 2024 and sell it today you would earn a total of  827.00  from holding Life Time Group or generate 37.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Life Time Group  vs.  Aldel Financial II

Life Time Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Life Time demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Aldel Financial II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Life Time and Aldel Financial

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

The idea behind Life Time Group and Aldel Financial II 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.