Correlation Between Life Time and GE Vernova

Can any of the company-specific risk be diversified away by investing in both Life Time and GE Vernova 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 GE Vernova 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 GE Vernova LLC, you can compare the effects of market volatilities on Life Time and GE Vernova 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 GE Vernova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Time and GE Vernova.

Diversification Opportunities for Life Time and GE Vernova

-0.25

Correlation Coefficient

Life Time  GE Vernova

Very good diversification

The 3 months correlation between Life and GEV is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Life Time i.e., Life Time and GE Vernova go up and down completely randomly.

Pair Corralation between Life Time and GE Vernova

Considering the 90-day investment horizon Life Time Group is expected to under-perform the GE Vernova. But the stock apears to be less risky and, when comparing its historical volatility, Life Time Group is 1.39 times less risky than GE Vernova. The stock trades about -0.1 of its potential returns per unit of risk. The GE Vernova LLC is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  26,950  in GE Vernova LLC on September 13, 2024 and sell it today you would earn a total of  6,538  from holding GE Vernova LLC or generate 24.26% return on investment over 90 days.

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

Life Time Group  vs.  GE Vernova LLC

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 latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

GE Vernova LLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Life Time and GE Vernova

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

The idea behind Life Time Group and GE Vernova LLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.