Correlation Between Sage Group and LifeSpeak

Can any of the company-specific risk be diversified away by investing in both Sage Group and LifeSpeak 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 Sage Group and LifeSpeak into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sage Group PLC and LifeSpeak, you can compare the effects of market volatilities on Sage Group and LifeSpeak 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 Sage Group with a short position of LifeSpeak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Group and LifeSpeak.

Diversification Opportunities for Sage Group and LifeSpeak

-0.81

Correlation Coefficient

Sage Group  LifeSpeak

Pay attention - limited upside

The 3 months correlation between Sage and LifeSpeak is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sage Group PLC and LifeSpeak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LifeSpeak and Sage Group 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 Sage Group PLC are associated (or correlated) with LifeSpeak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LifeSpeak has no effect on the direction of Sage Group i.e., Sage Group and LifeSpeak go up and down completely randomly.

Pair Corralation between Sage Group and LifeSpeak

Assuming the 90 days horizon Sage Group PLC is expected to generate 0.59 times more return on investment than LifeSpeak. However, Sage Group PLC is 1.68 times less risky than LifeSpeak. It trades about 0.16 of its potential returns per unit of risk. LifeSpeak is currently generating about -0.06 per unit of risk. If you would invest  5,241  in Sage Group PLC on September 5, 2024 and sell it today you would earn a total of  1,475  from holding Sage Group PLC or generate 28.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Sage Group PLC  vs.  LifeSpeak

Sage Group PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Group PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Sage Group showed solid returns over the last few months and may actually be approaching a breakup point.

LifeSpeak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LifeSpeak has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sage Group and LifeSpeak

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

The idea behind Sage Group PLC and LifeSpeak 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.