Correlation Between Life Time and Six Flags

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

Diversification Opportunities for Life Time and Six Flags

-0.24

Correlation Coefficient

Life Time  Six Flags

Very good diversification

The 3 months correlation between Life and Six is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment 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 Six Flags. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of Life Time i.e., Life Time and Six Flags go up and down completely randomly.

Pair Corralation between Life Time and Six Flags

Considering the 90-day investment horizon Life Time is expected to generate 1.72 times less return on investment than Six Flags. But when comparing it to its historical volatility, Life Time Group is 1.09 times less risky than Six Flags. It trades about 0.22 of its potential returns per unit of risk. Six Flags Entertainment is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  4,062  in Six Flags Entertainment on September 2, 2024 and sell it today you would earn a total of  557.00  from holding Six Flags Entertainment or generate 13.71% return on investment over 90 days.

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

Life Time Group  vs.  Six Flags Entertainment

Life Time Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Life Time is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Six Flags Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Six Flags Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Six Flags may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Life Time and Six Flags

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

The idea behind Life Time Group and Six Flags Entertainment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..