Correlation Between New Providence and Lifevantage
Can any of the company-specific risk be diversified away by investing in both New Providence and Lifevantage 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 New Providence and Lifevantage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Providence Acquisition and Lifevantage, you can compare the effects of market volatilities on New Providence and Lifevantage 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 New Providence with a short position of Lifevantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Providence and Lifevantage.
Diversification Opportunities for New Providence and Lifevantage
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and Lifevantage is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding New Providence Acquisition and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage and New Providence 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 New Providence Acquisition are associated (or correlated) with Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of New Providence i.e., New Providence and Lifevantage go up and down completely randomly.
Pair Corralation between New Providence and Lifevantage
Assuming the 90 days horizon New Providence is expected to generate 3.83 times less return on investment than Lifevantage. But when comparing it to its historical volatility, New Providence Acquisition is 2.37 times less risky than Lifevantage. It trades about 0.12 of its potential returns per unit of risk. Lifevantage is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,141 in Lifevantage on September 3, 2024 and sell it today you would earn a total of 320.00 from holding Lifevantage or generate 28.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 69.05% |
| Values | Daily Returns |
New Providence Acquisition vs. Lifevantage
Performance |
| Timeline |
| New Providence Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Lifevantage |
New Providence and Lifevantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Providence and Lifevantage
The main advantage of trading using opposite New Providence and Lifevantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Providence position performs unexpectedly, Lifevantage 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 Lifevantage will offset losses from the drop in Lifevantage's long position.| New Providence vs. Stepan Company | New Providence vs. Consol Energy | New Providence vs. Gentex | New Providence vs. Olympic Steel |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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