Correlation Between LIFE + and Postal Savings
Can any of the company-specific risk be diversified away by investing in both LIFE + and Postal Savings 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 + and Postal Savings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LIFE BANC SPLIT and Postal Savings Bank, you can compare the effects of market volatilities on LIFE + and Postal Savings 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 + with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE + and Postal Savings.
Diversification Opportunities for LIFE + and Postal Savings
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LIFE and Postal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and 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 LIFE BANC SPLIT are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of LIFE + i.e., LIFE + and Postal Savings go up and down completely randomly.
Pair Corralation between LIFE + and Postal Savings
Assuming the 90 days horizon LIFE BANC SPLIT is expected to generate 1.67 times more return on investment than Postal Savings. However, LIFE + is 1.67 times more volatile than Postal Savings Bank. It trades about 0.21 of its potential returns per unit of risk. Postal Savings Bank is currently generating about 0.01 per unit of risk. If you would invest 560.00 in LIFE BANC SPLIT on August 29, 2024 and sell it today you would earn a total of 80.00 from holding LIFE BANC SPLIT or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LIFE BANC SPLIT vs. Postal Savings Bank
Performance |
| Timeline |
| LIFE BANC SPLIT |
| Postal Savings Bank |
LIFE + and Postal Savings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LIFE + and Postal Savings
The main advantage of trading using opposite LIFE + and Postal Savings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFE + position performs unexpectedly, Postal Savings 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 Postal Savings will offset losses from the drop in Postal Savings' long position.The idea behind LIFE BANC SPLIT and Postal Savings Bank 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.| Postal Savings vs. Deutsche Bank Aktiengesellschaft | Postal Savings vs. Superior Plus Corp | Postal Savings vs. NMI Holdings | Postal Savings vs. Origin Agritech |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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