Correlation Between Life Time and LILLY

Can any of the company-specific risk be diversified away by investing in both Life Time and LILLY 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 LILLY 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 LILLY ELI 31, you can compare the effects of market volatilities on Life Time and LILLY 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 LILLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Time and LILLY.

Diversification Opportunities for Life Time and LILLY

0.32

Correlation Coefficient

Life Time  LILLY

Weak diversification

The 3 months correlation between Life and LILLY is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Life Time Group and LILLY ELI 31 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LILLY ELI 31 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 LILLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LILLY ELI 31 has no effect on the direction of Life Time i.e., Life Time and LILLY go up and down completely randomly.

Pair Corralation between Life Time and LILLY

Considering the 90-day investment horizon Life Time Group is expected to generate 5.53 times more return on investment than LILLY. However, Life Time is 5.53 times more volatile than LILLY ELI 31. It trades about 0.08 of its potential returns per unit of risk. LILLY ELI 31 is currently generating about -0.01 per unit of risk. If you would invest  1,509  in Life Time Group on September 14, 2024 and sell it today you would earn a total of  785.00  from holding Life Time Group or generate 52.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.32%
Values	Daily Returns

Life Time Group  vs.  LILLY ELI 31

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.

LILLY ELI 31

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LILLY ELI 31 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Life Time and LILLY

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

The idea behind Life Time Group and LILLY ELI 31 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.