Correlation Between Life Time and Marine Products

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

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

Diversification Opportunities for Life Time and Marine Products

0.47

Correlation Coefficient

Life Time  Marine Products

Very weak diversification

The 3 months correlation between Life and Marine is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products and Life Time 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 Life Time Group are associated (or correlated) with Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Life Time i.e., Life Time and Marine Products go up and down completely randomly.

Pair Corralation between Life Time and Marine Products

Considering the 90-day investment horizon Life Time is expected to generate 1.22 times less return on investment than Marine Products. But when comparing it to its historical volatility, Life Time Group is 1.06 times less risky than Marine Products. It trades about 0.05 of its potential returns per unit of risk. Marine Products is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  992.00  in Marine Products on February 4, 2024 and sell it today you would earn a total of  154.00  from holding Marine Products or generate 15.52% return on investment over 90 days.

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

Life Time Group  vs.  Marine Products

Life Time Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Life Time may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Marine Products

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Marine Products showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Life Time and Marine Products

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

The idea behind Life Time Group and Marine Products 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.