Correlation Between Arcosa and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Arcosa 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 Arcosa and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arcosa Inc and Lifeway Foods, you can compare the effects of market volatilities on Arcosa 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 Arcosa with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcosa and Lifeway Foods.
Diversification Opportunities for Arcosa and Lifeway Foods
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Arcosa and Lifeway is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Arcosa Inc and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Arcosa 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 Arcosa 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 Arcosa i.e., Arcosa and Lifeway Foods go up and down completely randomly.
Pair Corralation between Arcosa and Lifeway Foods
Assuming the 90 days horizon Arcosa Inc is expected to generate 0.36 times more return on investment than Lifeway Foods. However, Arcosa Inc is 2.76 times less risky than Lifeway Foods. It trades about 0.39 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.02 per unit of risk. If you would invest 8,550 in Arcosa Inc on September 2, 2024 and sell it today you would earn a total of 1,550 from holding Arcosa Inc or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arcosa Inc vs. Lifeway Foods
Performance |
| Timeline |
| Arcosa Inc |
| Lifeway Foods |
Arcosa and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arcosa and Lifeway Foods
The main advantage of trading using opposite Arcosa and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcosa 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 Arcosa 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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