Correlation Between Life Time and ECD Automotive

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

Diversification Opportunities for Life Time and ECD Automotive

0.03

Correlation Coefficient

Life Time  ECD Automotive

Significant diversification

The 3 months correlation between Life and ECD is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design 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 ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Life Time i.e., Life Time and ECD Automotive go up and down completely randomly.

Pair Corralation between Life Time and ECD Automotive

Considering the 90-day investment horizon Life Time Group is expected to generate 0.64 times more return on investment than ECD Automotive. However, Life Time Group is 1.56 times less risky than ECD Automotive. It trades about 0.62 of its potential returns per unit of risk. ECD Automotive Design is currently generating about -0.04 per unit of risk. If you would invest  2,225  in Life Time Group on October 20, 2024 and sell it today you would earn a total of  542.00  from holding Life Time Group or generate 24.36% return on investment over 90 days.

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

Life Time Group  vs.  ECD Automotive Design

Life Time Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Life Time may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ECD Automotive Design

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Life Time and ECD Automotive

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

The idea behind Life Time Group and ECD Automotive Design 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.