Correlation Between Lifeway Foods and Better Choice
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Better Choice 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 Lifeway Foods and Better Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Better Choice, you can compare the effects of market volatilities on Lifeway Foods and Better Choice 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 Lifeway Foods with a short position of Better Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Better Choice.
Diversification Opportunities for Lifeway Foods and Better Choice
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lifeway and Better is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice and Lifeway Foods 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 Lifeway Foods are associated (or correlated) with Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Better Choice go up and down completely randomly.
Pair Corralation between Lifeway Foods and Better Choice
Given the investment horizon of 90 days Lifeway Foods is expected to under-perform the Better Choice. But the stock apears to be less risky and, when comparing its historical volatility, Lifeway Foods is 1.53 times less risky than Better Choice. The stock trades about -0.1 of its potential returns per unit of risk. The Better Choice is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 173.00 in Better Choice on August 27, 2024 and sell it today you would earn a total of 7.00 from holding Better Choice or generate 4.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Better Choice
Performance |
| Timeline |
| Lifeway Foods |
| Better Choice |
Lifeway Foods and Better Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Better Choice
The main advantage of trading using opposite Lifeway Foods and Better Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Better Choice 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 Better Choice will offset losses from the drop in Better Choice's long position.| Lifeway Foods vs. Bellring Brands LLC | Lifeway Foods vs. Ingredion Incorporated | Lifeway Foods vs. Nomad Foods | Lifeway Foods vs. Simply Good Foods |
| Better Choice vs. Blue Star Foods | Better Choice vs. Stryve Foods | Better Choice vs. BioAdaptives | Better Choice vs. Beyond Oil |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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