Correlation Between Life Time and American Outdoor

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

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

Diversification Opportunities for Life Time and American Outdoor

0.17

Correlation Coefficient

Life Time  American Outdoor

Average diversification

The 3 months correlation between Life and American is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and American Outdoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Outdoor Brands and Life Time 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 Time Group are associated (or correlated) with American Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Outdoor Brands has no effect on the direction of Life Time i.e., Life Time and American Outdoor go up and down completely randomly.

Pair Corralation between Life Time and American Outdoor

Considering the 90-day investment horizon Life Time is expected to generate 1.78 times less return on investment than American Outdoor. But when comparing it to its historical volatility, Life Time Group is 1.32 times less risky than American Outdoor. It trades about 0.04 of its potential returns per unit of risk. American Outdoor Brands is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  920.00  in American Outdoor Brands on September 2, 2024 and sell it today you would earn a total of  61.00  from holding American Outdoor Brands or generate 6.63% return on investment over 90 days.

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

Life Time Group  vs.  American Outdoor Brands

Life Time Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Life Time is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

American Outdoor Brands

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Outdoor Brands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, American Outdoor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Life Time and American Outdoor

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

The idea behind Life Time Group and American Outdoor Brands 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.