Correlation Between Life Time and BANCO

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

Diversification Opportunities for Life Time and BANCO

0.5

Correlation Coefficient

Life Time  BANCO

Very weak diversification

The 3 months correlation between Life and BANCO is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and BANCO SANTANDER SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANCO SANTANDER SA 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 BANCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANCO SANTANDER SA has no effect on the direction of Life Time i.e., Life Time and BANCO go up and down completely randomly.

Pair Corralation between Life Time and BANCO

Considering the 90-day investment horizon Life Time is expected to generate 3.48 times less return on investment than BANCO. In addition to that, Life Time is 1.71 times more volatile than BANCO SANTANDER SA. It trades about 0.01 of its total potential returns per unit of risk. BANCO SANTANDER SA is currently generating about 0.07 per unit of volatility. If you would invest  9,232  in BANCO SANTANDER SA on October 11, 2024 and sell it today you would earn a total of  130.00  from holding BANCO SANTANDER SA or generate 1.41% return on investment over 90 days.

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

Life Time Group  vs.  BANCO SANTANDER SA

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.

BANCO SANTANDER SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Life Time and BANCO

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

The idea behind Life Time Group and BANCO SANTANDER SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.