Correlation Between LIFENET INSURANCE and Peabody Energy

Can any of the company-specific risk be diversified away by investing in both LIFENET INSURANCE and Peabody Energy 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 LIFENET INSURANCE and Peabody Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LIFENET INSURANCE CO and Peabody Energy, you can compare the effects of market volatilities on LIFENET INSURANCE and Peabody Energy 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 LIFENET INSURANCE with a short position of Peabody Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFENET INSURANCE and Peabody Energy.

Diversification Opportunities for LIFENET INSURANCE and Peabody Energy

0.27

Correlation Coefficient

LIFENET INSURANCE  Peabody Energy

Modest diversification

The 3 months correlation between LIFENET and Peabody is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding LIFENET INSURANCE CO and Peabody Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy and LIFENET INSURANCE 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 LIFENET INSURANCE CO are associated (or correlated) with Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy has no effect on the direction of LIFENET INSURANCE i.e., LIFENET INSURANCE and Peabody Energy go up and down completely randomly.

Pair Corralation between LIFENET INSURANCE and Peabody Energy

Assuming the 90 days horizon LIFENET INSURANCE CO is expected to generate 1.22 times more return on investment than Peabody Energy. However, LIFENET INSURANCE is 1.22 times more volatile than Peabody Energy. It trades about -0.09 of its potential returns per unit of risk. Peabody Energy is currently generating about -0.66 per unit of risk. If you would invest  1,170  in LIFENET INSURANCE CO on September 25, 2024 and sell it today you would lose (50.00) from holding LIFENET INSURANCE CO or give up 4.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

LIFENET INSURANCE CO  vs.  Peabody Energy

LIFENET INSURANCE

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LIFENET INSURANCE CO are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LIFENET INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

Peabody Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peabody Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with LIFENET INSURANCE and Peabody Energy

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

The idea behind LIFENET INSURANCE CO and Peabody Energy 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.