Correlation Between LIFENET INSURANCE and RATIONAL Aktiengesellscha

Can any of the company-specific risk be diversified away by investing in both LIFENET INSURANCE and RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellschaft, you can compare the effects of market volatilities on LIFENET INSURANCE and RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFENET INSURANCE and RATIONAL Aktiengesellscha.

Diversification Opportunities for LIFENET INSURANCE and RATIONAL Aktiengesellscha

-0.22

Correlation Coefficient

LIFENET INSURANCE  RATIONAL Aktiengesellscha

Very good diversification

The 3 months correlation between LIFENET and RATIONAL is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding LIFENET INSURANCE CO and RATIONAL Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RATIONAL Aktiengesellscha has no effect on the direction of LIFENET INSURANCE i.e., LIFENET INSURANCE and RATIONAL Aktiengesellscha go up and down completely randomly.

Pair Corralation between LIFENET INSURANCE and RATIONAL Aktiengesellscha

Assuming the 90 days horizon LIFENET INSURANCE CO is expected to generate 1.43 times more return on investment than RATIONAL Aktiengesellscha. However, LIFENET INSURANCE is 1.43 times more volatile than RATIONAL Aktiengesellschaft. It trades about -0.11 of its potential returns per unit of risk. RATIONAL Aktiengesellschaft is currently generating about -0.3 per unit of risk. If you would invest  1,170  in LIFENET INSURANCE CO on September 28, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LIFENET INSURANCE CO  vs.  RATIONAL Aktiengesellschaft

LIFENET INSURANCE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIFENET INSURANCE CO are ranked lower than 8 (%) 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.

RATIONAL Aktiengesellscha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RATIONAL Aktiengesellschaft 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 RATIONAL Aktiengesellscha

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

The idea behind LIFENET INSURANCE CO and RATIONAL Aktiengesellschaft 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.