Correlation Between Life Time and Sea
Can any of the company-specific risk be diversified away by investing in both Life Time and Sea 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 Time and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Time Group and Sea, you can compare the effects of market volatilities on Life Time and Sea 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 Time with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Time and Sea.
Diversification Opportunities for Life Time and Sea
Average diversification
The 3 months correlation between Life and Sea is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Life Time 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 Time Group are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Life Time i.e., Life Time and Sea go up and down completely randomly.
Pair Corralation between Life Time and Sea
Considering the 90-day investment horizon Life Time is expected to generate 8.27 times less return on investment than Sea. But when comparing it to its historical volatility, Life Time Group is 1.14 times less risky than Sea. It trades about 0.04 of its potential returns per unit of risk. Sea is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 7,740 in Sea on September 2, 2024 and sell it today you would earn a total of 3,640 from holding Sea or generate 47.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Time Group vs. Sea
Performance |
| Timeline |
| Life Time Group |
| Sea |
Life Time and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Time and Sea
The main advantage of trading using opposite Life Time and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Time position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.The idea behind Life Time Group and Sea 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.| Sea vs. Atari SA | Sea vs. Victory Square Technologies | Sea vs. Motorsport Gaming Us | Sea vs. Alpha Esports Tech |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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