Correlation Between Coffee Holding and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Coffee Holding 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 Coffee Holding and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coffee Holding Co and Lifeway Foods, you can compare the effects of market volatilities on Coffee Holding 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 Coffee Holding with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coffee Holding and Lifeway Foods.
Diversification Opportunities for Coffee Holding and Lifeway Foods
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coffee and Lifeway is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Coffee Holding 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 Coffee Holding Co 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 Coffee Holding i.e., Coffee Holding and Lifeway Foods go up and down completely randomly.
Pair Corralation between Coffee Holding and Lifeway Foods
Considering the 90-day investment horizon Coffee Holding is expected to generate 2.0 times less return on investment than Lifeway Foods. But when comparing it to its historical volatility, Coffee Holding Co is 1.19 times less risky than Lifeway Foods. It trades about 0.04 of its potential returns per unit of risk. Lifeway Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 680.00 in Lifeway Foods on August 24, 2024 and sell it today you would earn a total of 1,738 from holding Lifeway Foods or generate 255.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coffee Holding Co vs. Lifeway Foods
Performance |
| Timeline |
| Coffee Holding |
| Lifeway Foods |
Coffee Holding and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coffee Holding and Lifeway Foods
The main advantage of trading using opposite Coffee Holding and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coffee Holding 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.| Coffee Holding vs. Seneca Foods Corp | Coffee Holding vs. Natures Sunshine Products | Coffee Holding vs. J J Snack | Coffee Holding vs. John B Sanfilippo |
| Lifeway Foods vs. Better Choice | Lifeway Foods vs. BioAdaptives | Lifeway Foods vs. Beyond Oil | Lifeway Foods vs. Bon Natural Life |
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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