Correlation Between PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE

Can any of the company-specific risk be diversified away by investing in both PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE 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 PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PROSIEBENSAT1 MEDIADR4 and LIFENET INSURANCE CO, you can compare the effects of market volatilities on PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE 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 PROSIEBENSAT1 MEDIADR4/ with a short position of LIFENET INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE.

Diversification Opportunities for PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE

-0.51

Correlation Coefficient

PROSIEBENSAT1 MEDIADR4/  LIFENET INSURANCE

Excellent diversification

The 3 months correlation between PROSIEBENSAT1 and LIFENET is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding PROSIEBENSAT1 MEDIADR4 and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE and PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4 are associated (or correlated) with LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of PROSIEBENSAT1 MEDIADR4/ i.e., PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE

Assuming the 90 days trading horizon PROSIEBENSAT1 MEDIADR4 is expected to generate 1.53 times more return on investment than LIFENET INSURANCE. However, PROSIEBENSAT1 MEDIADR4/ is 1.53 times more volatile than LIFENET INSURANCE CO. It trades about 0.2 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.09 per unit of risk. If you would invest  121.00  in PROSIEBENSAT1 MEDIADR4 on December 25, 2024 and sell it today you would earn a total of  42.00  from holding PROSIEBENSAT1 MEDIADR4 or generate 34.71% return on investment over 90 days.

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

PROSIEBENSAT1 MEDIADR4  vs.  LIFENET INSURANCE CO

PROSIEBENSAT1 MEDIADR4/

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PROSIEBENSAT1 MEDIADR4 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, PROSIEBENSAT1 MEDIADR4/ reported solid returns over the last few months and may actually be approaching a breakup point.

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE

The main advantage of trading using opposite PROSIEBENSAT1 MEDIADR4/ and LIFENET INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PROSIEBENSAT1 MEDIADR4/ position performs unexpectedly, LIFENET INSURANCE 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 LIFENET INSURANCE will offset losses from the drop in LIFENET INSURANCE's long position.

The idea behind PROSIEBENSAT1 MEDIADR4 and LIFENET INSURANCE CO 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.