Correlation Between Life Time and KINDER

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

Diversification Opportunities for Life Time and KINDER

0.41

Correlation Coefficient

Life Time  KINDER

Very weak diversification

The 3 months correlation between Life and KINDER is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of Life Time i.e., Life Time and KINDER go up and down completely randomly.

Pair Corralation between Life Time and KINDER

Considering the 90-day investment horizon Life Time Group is expected to under-perform the KINDER. In addition to that, Life Time is 1.37 times more volatile than KINDER MORGAN ENERGY. It trades about -0.11 of its total potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.06 per unit of volatility. If you would invest  11,322  in KINDER MORGAN ENERGY on September 13, 2024 and sell it today you would lose (132.00) from holding KINDER MORGAN ENERGY or give up 1.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.27%
Values	Daily Returns

Life Time Group  vs.  KINDER MORGAN ENERGY

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 newest stock price confusion, may contribute to short-horizon losses for the traders.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KINDER MORGAN ENERGY investors.

Pair Trading with Life Time and KINDER

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

The idea behind Life Time Group and KINDER MORGAN ENERGY 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.