Correlation Between Life Time and VHAI

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

Diversification Opportunities for Life Time and VHAI

0.48

Correlation Coefficient

Life Time  VHAI

Very weak diversification

The 3 months correlation between Life and VHAI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and VHAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VHAI 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 VHAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VHAI has no effect on the direction of Life Time i.e., Life Time and VHAI go up and down completely randomly.

Pair Corralation between Life Time and VHAI

Considering the 90-day investment horizon Life Time Group is expected to generate 0.2 times more return on investment than VHAI. However, Life Time Group is 5.07 times less risky than VHAI. It trades about 0.08 of its potential returns per unit of risk. VHAI is currently generating about -0.12 per unit of risk. If you would invest  2,532  in Life Time Group on October 23, 2024 and sell it today you would earn a total of  235.00  from holding Life Time Group or generate 9.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	45.0%
Values	Daily Returns

Life Time Group  vs.  VHAI

Life Time Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Life Time may actually be approaching a critical reversion point that can send shares even higher in February 2025.

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Life Time and VHAI

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

The idea behind Life Time Group and VHAI 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.