Correlation Between SOUTHERN and Lifevantage

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

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

Diversification Opportunities for SOUTHERN and Lifevantage

-0.54

Correlation Coefficient

SOUTHERN  Lifevantage

Excellent diversification

The 3 months correlation between SOUTHERN and Lifevantage is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN PER CORP and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage and SOUTHERN 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 SOUTHERN PER CORP are associated (or correlated) with Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of SOUTHERN i.e., SOUTHERN and Lifevantage go up and down completely randomly.

Pair Corralation between SOUTHERN and Lifevantage

Assuming the 90 days trading horizon SOUTHERN PER CORP is expected to under-perform the Lifevantage. But the bond apears to be less risky and, when comparing its historical volatility, SOUTHERN PER CORP is 12.06 times less risky than Lifevantage. The bond trades about -0.16 of its potential returns per unit of risk. The Lifevantage is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,416  in Lifevantage on September 23, 2024 and sell it today you would earn a total of  320.00  from holding Lifevantage or generate 22.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

SOUTHERN PER CORP  vs.  Lifevantage

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lifevantage

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOUTHERN and Lifevantage

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

The idea behind SOUTHERN PER CORP and Lifevantage 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.