Correlation Between Apple and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Lifeway Foods, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Lifeway Foods.
Diversification Opportunities for Apple and Lifeway Foods
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Apple and Lifeway is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Apple 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 Apple Inc 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 Apple i.e., Apple and Lifeway Foods go up and down completely randomly.
Pair Corralation between Apple and Lifeway Foods
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.24 times more return on investment than Lifeway Foods. However, Apple Inc is 4.22 times less risky than Lifeway Foods. It trades about 0.2 of its potential returns per unit of risk. Lifeway Foods is currently generating about 0.0 per unit of risk. If you would invest 21,135 in Apple Inc on August 31, 2024 and sell it today you would earn a total of 1,180 from holding Apple Inc or generate 5.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Lifeway Foods
Performance |
| Timeline |
| Apple Inc |
| Lifeway Foods |
Apple and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Lifeway Foods
The main advantage of trading using opposite Apple and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.The idea behind Apple Inc and Lifeway Foods 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.| Lifeway Foods vs. Danone SA | Lifeway Foods vs. Superior Plus Corp | Lifeway Foods vs. NMI Holdings | Lifeway Foods vs. Origin Agritech |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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