Correlation Between Life Time and Willamette Valley

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

Diversification Opportunities for Life Time and Willamette Valley

0.5

Correlation Coefficient

Life Time  Willamette Valley

Very weak diversification

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

Pair Corralation between Life Time and Willamette Valley

Considering the 90-day investment horizon Life Time Group is expected to generate 1.51 times more return on investment than Willamette Valley. However, Life Time is 1.51 times more volatile than Willamette Valley Vineyards. It trades about 0.06 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.06 per unit of risk. If you would invest  1,165  in Life Time Group on September 21, 2024 and sell it today you would earn a total of  1,060  from holding Life Time Group or generate 90.99% 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.  Willamette Valley Vineyards

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 latest abnormal performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Life Time and Willamette Valley

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

The idea behind Life Time Group and Willamette Valley Vineyards 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..