Correlation Between Stone Ridge and Lifex Income
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and Lifex Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and Lifex Income, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Lifex Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Lifex Income.
Diversification Opportunities for Stone Ridge and Lifex Income
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stone and Lifex is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Lifex Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Income and Stone Ridge 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 Stone Ridge Diversified 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 Stone Ridge i.e., Stone Ridge and Lifex Income go up and down completely randomly.
Pair Corralation between Stone Ridge and Lifex Income
Assuming the 90 days horizon Stone Ridge is expected to generate 1.27 times less return on investment than Lifex Income. But when comparing it to its historical volatility, Stone Ridge Diversified is 2.08 times less risky than Lifex Income. It trades about 0.22 of its potential returns per unit of risk. Lifex Income is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,632 in Lifex Income on September 1, 2024 and sell it today you would earn a total of 133.00 from holding Lifex Income or generate 8.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Stone Ridge Diversified vs. Lifex Income
Performance |
| Timeline |
| Stone Ridge Diversified |
| Lifex Income |
Stone Ridge and Lifex Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and Lifex Income
The main advantage of trading using opposite Stone Ridge and Lifex Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Strategic Allocation Aggressive | Stone Ridge vs. Ab High Income | Stone Ridge vs. Western Asset High | Stone Ridge vs. T Rowe Price |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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