Correlation Between Tree House and Life Insurance

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

By analyzing existing cross correlation between Tree House Education and Life Insurance, you can compare the effects of market volatilities on Tree House and Life 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 Tree House with a short position of Life Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree House and Life Insurance.

Diversification Opportunities for Tree House and Life Insurance

0.32

Correlation Coefficient

Tree House  Life Insurance

Weak diversification

The 3 months correlation between Tree and Life is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tree House Education and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance and Tree House 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 Tree House Education are associated (or correlated) with Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of Tree House i.e., Tree House and Life Insurance go up and down completely randomly.

Pair Corralation between Tree House and Life Insurance

Assuming the 90 days trading horizon Tree House Education is expected to generate 1.29 times more return on investment than Life Insurance. However, Tree House is 1.29 times more volatile than Life Insurance. It trades about 0.04 of its potential returns per unit of risk. Life Insurance is currently generating about -0.17 per unit of risk. If you would invest  1,764  in Tree House Education on October 26, 2024 and sell it today you would earn a total of  25.00  from holding Tree House Education or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Tree House Education  vs.  Life Insurance

Tree House Education

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tree House Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Tree House is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tree House and Life Insurance

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

The idea behind Tree House Education and Life Insurance 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.