Correlation Between HE Equipment and Life Time

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

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

Diversification Opportunities for HE Equipment and Life Time

-0.24

Correlation Coefficient

HE Equipment  Life Time

Very good diversification

The 3 months correlation between HEES and Life is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services 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 HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Life Time go up and down completely randomly.

Pair Corralation between HE Equipment and Life Time

Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.23 times more return on investment than Life Time. However, HE Equipment is 1.23 times more volatile than Life Time Group. It trades about 0.09 of its potential returns per unit of risk. Life Time Group is currently generating about 0.09 per unit of risk. If you would invest  4,310  in HE Equipment Services on September 14, 2024 and sell it today you would earn a total of  1,279  from holding HE Equipment Services or generate 29.68% return on investment over 90 days.

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

HE Equipment Services  vs.  Life Time Group

HE Equipment Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 HE Equipment and Life Time

The main advantage of trading using opposite HE Equipment and Life Time positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.