Correlation Between Lifestyle and Abbey Capital
Can any of the company-specific risk be diversified away by investing in both Lifestyle and Abbey Capital 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 Lifestyle and Abbey Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifestyle Ii Moderate and Abbey Capital Multi, you can compare the effects of market volatilities on Lifestyle and Abbey Capital 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 Lifestyle with a short position of Abbey Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifestyle and Abbey Capital.
Diversification Opportunities for Lifestyle and Abbey Capital
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lifestyle and Abbey is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lifestyle Ii Moderate and Abbey Capital Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbey Capital Multi and Lifestyle 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 Lifestyle Ii Moderate are associated (or correlated) with Abbey Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbey Capital Multi has no effect on the direction of Lifestyle i.e., Lifestyle and Abbey Capital go up and down completely randomly.
Pair Corralation between Lifestyle and Abbey Capital
Assuming the 90 days horizon Lifestyle is expected to generate 1.43 times less return on investment than Abbey Capital. But when comparing it to its historical volatility, Lifestyle Ii Moderate is 2.46 times less risky than Abbey Capital. It trades about 0.2 of its potential returns per unit of risk. Abbey Capital Multi is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,162 in Abbey Capital Multi on August 31, 2024 and sell it today you would earn a total of 25.00 from holding Abbey Capital Multi or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifestyle Ii Moderate vs. Abbey Capital Multi
Performance |
| Timeline |
| Lifestyle Ii Moderate |
| Abbey Capital Multi |
Lifestyle and Abbey Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifestyle and Abbey Capital
The main advantage of trading using opposite Lifestyle and Abbey Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifestyle position performs unexpectedly, Abbey Capital 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 Abbey Capital will offset losses from the drop in Abbey Capital's long position.| Lifestyle vs. Prudential Health Sciences | Lifestyle vs. Alphacentric Lifesci Healthcare | Lifestyle vs. Deutsche Health And | Lifestyle vs. Highland Longshort Healthcare |
| Abbey Capital vs. Pro Blend Moderate Term | Abbey Capital vs. Lifestyle Ii Moderate | Abbey Capital vs. Multimanager Lifestyle Moderate | Abbey Capital vs. Calvert Moderate Allocation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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