Correlation Between Xponential Fitness and Life Time

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

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

Diversification Opportunities for Xponential Fitness and Life Time

-0.85

Correlation Coefficient

Xponential Fitness  Life Time

Pay attention - limited upside

The 3 months correlation between Xponential and Life is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and Life Time Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Time Group and Xponential Fitness 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 Xponential Fitness are associated (or correlated) with Life Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Time Group has no effect on the direction of Xponential Fitness i.e., Xponential Fitness and Life Time go up and down completely randomly.

Pair Corralation between Xponential Fitness and Life Time

Given the investment horizon of 90 days Xponential Fitness is expected to generate 1.35 times more return on investment than Life Time. However, Xponential Fitness is 1.35 times more volatile than Life Time Group. It trades about 0.1 of its potential returns per unit of risk. Life Time Group is currently generating about 0.12 per unit of risk. If you would invest  1,227  in Xponential Fitness on July 23, 2024 and sell it today you would earn a total of  54.00  from holding Xponential Fitness or generate 4.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Xponential Fitness  vs.  Life Time Group

Xponential Fitness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xponential Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Life Time Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Life Time demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xponential Fitness and Life Time

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

The idea behind Xponential Fitness and Life Time Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.