Correlation Between Knowles and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Knowles and Lifeway Foods 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 Knowles and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knowles and Lifeway Foods, you can compare the effects of market volatilities on Knowles and Lifeway Foods 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 Knowles with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knowles and Lifeway Foods.
Diversification Opportunities for Knowles and Lifeway Foods
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Knowles and Lifeway is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Knowles and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Knowles 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 Knowles are associated (or correlated) with Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Knowles i.e., Knowles and Lifeway Foods go up and down completely randomly.
Pair Corralation between Knowles and Lifeway Foods
Assuming the 90 days horizon Knowles is expected to generate 1.06 times more return on investment than Lifeway Foods. However, Knowles is 1.06 times more volatile than Lifeway Foods. It trades about -0.19 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.26 per unit of risk. If you would invest 1,950 in Knowles on November 3, 2024 and sell it today you would lose (130.00) from holding Knowles or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knowles vs. Lifeway Foods
Performance |
| Timeline |
| Knowles |
| Lifeway Foods |
Knowles and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knowles and Lifeway Foods
The main advantage of trading using opposite Knowles and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| Knowles vs. Harmony Gold Mining | Knowles vs. GameStop Corp | Knowles vs. Scientific Games | Knowles vs. International Game Technology |
| Lifeway Foods vs. Nestl SA | Lifeway Foods vs. Kraft Heinz Co | Lifeway Foods vs. General Mills | Lifeway Foods vs. General Mills |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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