Correlation Between Stone Ridge and Lifex Inflation

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

By analyzing existing cross correlation between Stone Ridge High and Lifex Inflation Protected Income, you can compare the effects of market volatilities on Stone Ridge and Lifex Inflation 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 Stone Ridge with a short position of Lifex Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Lifex Inflation.

Diversification Opportunities for Stone Ridge and Lifex Inflation

0.2

Correlation Coefficient

Stone Ridge  Lifex Inflation

Modest diversification

The 3 months correlation between Stone and Lifex is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge High and Lifex Inflation Protected Inco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Inflation Prot and Stone Ridge 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 Stone Ridge High are associated (or correlated) with Lifex Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifex Inflation Prot has no effect on the direction of Stone Ridge i.e., Stone Ridge and Lifex Inflation go up and down completely randomly.

Pair Corralation between Stone Ridge and Lifex Inflation

Assuming the 90 days horizon Stone Ridge High is expected to generate 1.26 times more return on investment than Lifex Inflation. However, Stone Ridge is 1.26 times more volatile than Lifex Inflation Protected Income. It trades about 0.14 of its potential returns per unit of risk. Lifex Inflation Protected Income is currently generating about 0.11 per unit of risk. If you would invest  865.00  in Stone Ridge High on September 15, 2024 and sell it today you would earn a total of  81.00  from holding Stone Ridge High or generate 9.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.76%
Values	Daily Returns

Stone Ridge High  vs.  Lifex Inflation Protected Inco

Stone Ridge High

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge High are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lifex Inflation Prot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifex Inflation Protected Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Lifex Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stone Ridge and Lifex Inflation

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

The idea behind Stone Ridge High and Lifex Inflation Protected Income 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.