Correlation Between Social Life and Labor Smart

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

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

Diversification Opportunities for Social Life and Labor Smart

0.32

Correlation Coefficient

Social Life  Labor Smart

Weak diversification

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

Pair Corralation between Social Life and Labor Smart

Given the investment horizon of 90 days Social Life Network is expected to generate 3.11 times more return on investment than Labor Smart. However, Social Life is 3.11 times more volatile than Labor Smart. It trades about 0.09 of its potential returns per unit of risk. Labor Smart is currently generating about 0.02 per unit of risk. If you would invest  0.04  in Social Life Network on December 27, 2024 and sell it today you would lose (0.01) from holding Social Life Network or give up 25.0% of portfolio value over 90 days.

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

Social Life Network  vs.  Labor Smart

Social Life Network

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Social Life Network are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Social Life reported solid returns over the last few months and may actually be approaching a breakup point.

Labor Smart

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Labor Smart are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Labor Smart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Social Life and Labor Smart

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

The idea behind Social Life Network and Labor Smart 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.