Correlation Between CenterPoint Energy and Life Time

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

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

Diversification Opportunities for CenterPoint Energy and Life Time

-0.08

Correlation Coefficient

CenterPoint Energy  Life Time

Good diversification

The 3 months correlation between CenterPoint and Life is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Life Time Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Time Group and CenterPoint Energy 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 CenterPoint Energy are associated (or correlated) with Life Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Time Group has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and Life Time go up and down completely randomly.

Pair Corralation between CenterPoint Energy and Life Time

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 0.61 times more return on investment than Life Time. However, CenterPoint Energy is 1.63 times less risky than Life Time. It trades about 0.16 of its potential returns per unit of risk. Life Time Group is currently generating about -0.04 per unit of risk. If you would invest  2,802  in CenterPoint Energy on September 14, 2024 and sell it today you would earn a total of  339.00  from holding CenterPoint Energy or generate 12.1% return on investment over 90 days.

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

CenterPoint Energy  vs.  Life Time Group

CenterPoint Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Life Time Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Time Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Life Time is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CenterPoint Energy and Life Time

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

The idea behind CenterPoint Energy and Life Time Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.