Correlation Between Life Time and Drive Shack

Can any of the company-specific risk be diversified away by investing in both Life Time and Drive Shack 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 Drive Shack 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 Drive Shack, you can compare the effects of market volatilities on Life Time and Drive Shack 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 Drive Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Time and Drive Shack.

Diversification Opportunities for Life Time and Drive Shack

0.0

Correlation Coefficient

Life Time  Drive Shack

Pay attention - limited upside

The 3 months correlation between Life and Drive is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Drive Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drive Shack 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 Drive Shack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drive Shack has no effect on the direction of Life Time i.e., Life Time and Drive Shack go up and down completely randomly.

Pair Corralation between Life Time and Drive Shack

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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Life Time Group  vs.  Drive Shack

Life Time Group

Risk-Adjusted Performance

Good

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.

Drive Shack

Risk-Adjusted Performance

Very Weak

Over the last 90 days Drive Shack has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Drive Shack is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Life Time and Drive Shack

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

The idea behind Life Time Group and Drive Shack 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.