Correlation Between Lifex Income and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Lifex Income and Stone Ridge 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 Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifex Income and Stone Ridge Diversified, you can compare the effects of market volatilities on Lifex Income and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifex Income and Stone Ridge.
Diversification Opportunities for Lifex Income and Stone Ridge
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lifex and Stone is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lifex Income and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Lifex Income i.e., Lifex Income and Stone Ridge go up and down completely randomly.
Pair Corralation between Lifex Income and Stone Ridge
Assuming the 90 days horizon Lifex Income is expected to generate 1.91 times less return on investment than Stone Ridge. In addition to that, Lifex Income is 3.04 times more volatile than Stone Ridge Diversified. It trades about 0.04 of its total potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.25 per unit of volatility. If you would invest 878.00 in Stone Ridge Diversified on August 30, 2024 and sell it today you would earn a total of 246.00 from holding Stone Ridge Diversified or generate 28.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 45.45% |
| Values | Daily Returns |
Lifex Income vs. Stone Ridge Diversified
Performance |
| Timeline |
| Lifex Income |
| Stone Ridge Diversified |
Lifex Income and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifex Income and Stone Ridge
The main advantage of trading using opposite Lifex Income and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifex Income position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.| Lifex Income vs. Lifex Inflation Protected Income | Lifex Income vs. Lifex Inflation Protected Income | Lifex Income vs. Lifex Inflation Protected Income | Lifex Income vs. Lifex Inflation Protected Income |
| Stone Ridge vs. Small Pany Growth | Stone Ridge vs. Kinetics Small Cap | Stone Ridge vs. Gmo Small Cap | Stone Ridge vs. Champlain Small |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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