Correlation Between Lifex Inflation-protec and Lifex Income
Can any of the company-specific risk be diversified away by investing in both Lifex Inflation-protec and Lifex Income 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 Inflation-protec and Lifex Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifex Inflation Protected Income and Lifex Income, you can compare the effects of market volatilities on Lifex Inflation-protec and Lifex Income 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 Inflation-protec with a short position of Lifex Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifex Inflation-protec and Lifex Income.
Diversification Opportunities for Lifex Inflation-protec and Lifex Income
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lifex and Lifex is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Lifex Inflation Protected Inco and Lifex Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Income and Lifex Inflation-protec 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 Inflation Protected Income are associated (or correlated) with Lifex Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifex Income has no effect on the direction of Lifex Inflation-protec i.e., Lifex Inflation-protec and Lifex Income go up and down completely randomly.
Pair Corralation between Lifex Inflation-protec and Lifex Income
Assuming the 90 days horizon Lifex Inflation-protec is expected to generate 1.37 times less return on investment than Lifex Income. But when comparing it to its historical volatility, Lifex Inflation Protected Income is 1.24 times less risky than Lifex Income. It trades about 0.12 of its potential returns per unit of risk. Lifex Income is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,596 in Lifex Income on September 1, 2024 and sell it today you would earn a total of 127.00 from holding Lifex Income or generate 7.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifex Inflation Protected Inco vs. Lifex Income
Performance |
| Timeline |
| Lifex Inflation-protec |
| Lifex Income |
Lifex Inflation-protec and Lifex Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifex Inflation-protec and Lifex Income
The main advantage of trading using opposite Lifex Inflation-protec and Lifex Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifex Inflation-protec position performs unexpectedly, Lifex Income 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 Lifex Income will offset losses from the drop in Lifex Income's long position.The idea behind Lifex Inflation Protected Income and Lifex Income 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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