Correlation Between Life Time and Net Lease

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

Diversification Opportunities for Life Time and Net Lease

0.04

Correlation Coefficient

Life Time  Net Lease

Significant diversification

The 3 months correlation between Life and Net is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Net Lease Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Lease Office 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 Net Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Lease Office has no effect on the direction of Life Time i.e., Life Time and Net Lease go up and down completely randomly.

Pair Corralation between Life Time and Net Lease

Considering the 90-day investment horizon Life Time Group is expected to generate 1.06 times more return on investment than Net Lease. However, Life Time is 1.06 times more volatile than Net Lease Office. It trades about -0.05 of its potential returns per unit of risk. Net Lease Office is currently generating about -0.3 per unit of risk. If you would invest  2,351  in Life Time Group on October 10, 2024 and sell it today you would lose (46.00) from holding Life Time Group or give up 1.96% of portfolio value over 90 days.

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

Life Time Group  vs.  Net Lease Office

Life Time Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Time Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Life Time is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Net Lease Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Net Lease Office has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Net Lease is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Life Time and Net Lease

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

The idea behind Life Time Group and Net Lease Office 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.