Correlation Between Stonebridge Acquisition and Lifestore Financial

Can any of the company-specific risk be diversified away by investing in both Stonebridge Acquisition and Lifestore Financial 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 Stonebridge Acquisition and Lifestore Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stonebridge Acquisition Corp and Lifestore Financial Group, you can compare the effects of market volatilities on Stonebridge Acquisition and Lifestore Financial 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 Stonebridge Acquisition with a short position of Lifestore Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stonebridge Acquisition and Lifestore Financial.

Diversification Opportunities for Stonebridge Acquisition and Lifestore Financial

0.82

Correlation Coefficient

Stonebridge Acquisition  Lifestore Financial

Very poor diversification

The 3 months correlation between Stonebridge and Lifestore is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Stonebridge Acquisition Corp and Lifestore Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestore Financial and Stonebridge Acquisition 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 Stonebridge Acquisition Corp are associated (or correlated) with Lifestore Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestore Financial has no effect on the direction of Stonebridge Acquisition i.e., Stonebridge Acquisition and Lifestore Financial go up and down completely randomly.

Pair Corralation between Stonebridge Acquisition and Lifestore Financial

Given the investment horizon of 90 days Stonebridge Acquisition Corp is expected to generate 0.09 times more return on investment than Lifestore Financial. However, Stonebridge Acquisition Corp is 11.62 times less risky than Lifestore Financial. It trades about 0.19 of its potential returns per unit of risk. Lifestore Financial Group is currently generating about 0.01 per unit of risk. If you would invest  1,022  in Stonebridge Acquisition Corp on September 11, 2024 and sell it today you would earn a total of  73.00  from holding Stonebridge Acquisition Corp or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	34.51%
Values	Daily Returns

Stonebridge Acquisition Corp  vs.  Lifestore Financial Group

Stonebridge Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stonebridge Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Stonebridge Acquisition is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lifestore Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifestore Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Lifestore Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stonebridge Acquisition and Lifestore Financial

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

The idea behind Stonebridge Acquisition Corp and Lifestore Financial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.