Correlation Between Life Time and Johnson Outdoors

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

Diversification Opportunities for Life Time and Johnson Outdoors

0.27

Correlation Coefficient

Life Time  Johnson Outdoors

Modest diversification

The 3 months correlation between Life and Johnson is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors 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 Johnson Outdoors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Outdoors has no effect on the direction of Life Time i.e., Life Time and Johnson Outdoors go up and down completely randomly.

Pair Corralation between Life Time and Johnson Outdoors

Considering the 90-day investment horizon Life Time Group is expected to generate 1.15 times more return on investment than Johnson Outdoors. However, Life Time is 1.15 times more volatile than Johnson Outdoors. It trades about 0.04 of its potential returns per unit of risk. Johnson Outdoors is currently generating about -0.05 per unit of risk. If you would invest  2,342  in Life Time Group on September 2, 2024 and sell it today you would earn a total of  85.00  from holding Life Time Group or generate 3.63% return on investment over 90 days.

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

Life Time Group  vs.  Johnson Outdoors

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.

Johnson Outdoors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Johnson Outdoors is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Life Time and Johnson Outdoors

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

The idea behind Life Time Group and Johnson Outdoors 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.