Correlation Between Lifex Income and Lifex Inflation-protec

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

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

Diversification Opportunities for Lifex Income and Lifex Inflation-protec

0.96

Correlation Coefficient

Lifex Income  Lifex Inflation-protec

Almost no diversification

The 3 months correlation between Lifex and Lifex is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Lifex Income and Lifex Inflation Protected Inco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Inflation-protec and Lifex Income 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 Lifex Income are associated (or correlated) with Lifex Inflation-protec. 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-protec has no effect on the direction of Lifex Income i.e., Lifex Income and Lifex Inflation-protec go up and down completely randomly.

Pair Corralation between Lifex Income and Lifex Inflation-protec

Assuming the 90 days horizon Lifex Income is expected to generate 1.46 times more return on investment than Lifex Inflation-protec. However, Lifex Income is 1.46 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 0.14 per unit of risk. If you would invest  1,468  in Lifex Income on August 18, 2024 and sell it today you would earn a total of  118.00  from holding Lifex Income or generate 8.04% return on investment over 90 days.

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

Lifex Income  vs.  Lifex Inflation Protected Inco

Lifex Income

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifex Income are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Lifex Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lifex Inflation-protec

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifex Inflation Protected Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Lifex Inflation-protec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lifex Income and Lifex Inflation-protec

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

The idea behind Lifex Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.