Correlation Between Life Electric and UDR
Can any of the company-specific risk be diversified away by investing in both Life Electric and UDR 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 Electric and UDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Electric Vehicles and UDR Inc, you can compare the effects of market volatilities on Life Electric and UDR 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 Electric with a short position of UDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Electric and UDR.
Diversification Opportunities for Life Electric and UDR
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Life and UDR is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Life Electric Vehicles and UDR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UDR Inc and Life Electric 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 Electric Vehicles are associated (or correlated) with UDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UDR Inc has no effect on the direction of Life Electric i.e., Life Electric and UDR go up and down completely randomly.
Pair Corralation between Life Electric and UDR
Given the investment horizon of 90 days Life Electric Vehicles is expected to generate 9.15 times more return on investment than UDR. However, Life Electric is 9.15 times more volatile than UDR Inc. It trades about 0.02 of its potential returns per unit of risk. UDR Inc is currently generating about 0.11 per unit of risk. If you would invest 60.00 in Life Electric Vehicles on September 2, 2024 and sell it today you would lose (35.00) from holding Life Electric Vehicles or give up 58.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Electric Vehicles vs. UDR Inc
Performance |
| Timeline |
| Life Electric Vehicles |
| UDR Inc |
Life Electric and UDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Electric and UDR
The main advantage of trading using opposite Life Electric and UDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Electric position performs unexpectedly, UDR 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 UDR will offset losses from the drop in UDR's long position.| Life Electric vs. Volkswagen AG 110 | Life Electric vs. Stellantis NV | Life Electric vs. Toyota Motor | Life Electric vs. Honda Motor Co |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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