Correlation Between LIFE + and SEKISUI CHEMICAL

Can any of the company-specific risk be diversified away by investing in both LIFE + and SEKISUI CHEMICAL 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 + and SEKISUI CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LIFE BANC SPLIT and SEKISUI CHEMICAL, you can compare the effects of market volatilities on LIFE + and SEKISUI CHEMICAL 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 + with a short position of SEKISUI CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE + and SEKISUI CHEMICAL.

Diversification Opportunities for LIFE + and SEKISUI CHEMICAL

0.5

Correlation Coefficient

LIFE +  SEKISUI CHEMICAL

Very weak diversification

The 3 months correlation between LIFE and SEKISUI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and SEKISUI CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEKISUI CHEMICAL and LIFE + 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 BANC SPLIT are associated (or correlated) with SEKISUI CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEKISUI CHEMICAL has no effect on the direction of LIFE + i.e., LIFE + and SEKISUI CHEMICAL go up and down completely randomly.

Pair Corralation between LIFE + and SEKISUI CHEMICAL

Assuming the 90 days horizon LIFE BANC SPLIT is expected to generate 1.94 times more return on investment than SEKISUI CHEMICAL. However, LIFE + is 1.94 times more volatile than SEKISUI CHEMICAL. It trades about 0.17 of its potential returns per unit of risk. SEKISUI CHEMICAL is currently generating about 0.14 per unit of risk. If you would invest  492.00  in LIFE BANC SPLIT on August 31, 2024 and sell it today you would earn a total of  148.00  from holding LIFE BANC SPLIT or generate 30.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

LIFE BANC SPLIT  vs.  SEKISUI CHEMICAL

LIFE BANC SPLIT

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LIFE BANC SPLIT are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, LIFE + reported solid returns over the last few months and may actually be approaching a breakup point.

SEKISUI CHEMICAL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEKISUI CHEMICAL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, SEKISUI CHEMICAL may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with LIFE + and SEKISUI CHEMICAL

The main advantage of trading using opposite LIFE + and SEKISUI CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFE + position performs unexpectedly, SEKISUI CHEMICAL 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 SEKISUI CHEMICAL will offset losses from the drop in SEKISUI CHEMICAL's long position.

The idea behind LIFE BANC SPLIT and SEKISUI CHEMICAL 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.