Correlation Between Lifeway Foods and Lamar Advertising
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Lamar Advertising 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 Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Lamar Advertising, you can compare the effects of market volatilities on Lifeway Foods and Lamar Advertising 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 Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Lamar Advertising.
Diversification Opportunities for Lifeway Foods and Lamar Advertising
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lifeway and Lamar is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising 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 Lamar Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamar Advertising has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Lamar Advertising go up and down completely randomly.
Pair Corralation between Lifeway Foods and Lamar Advertising
Assuming the 90 days horizon Lifeway Foods is expected to generate 1.47 times more return on investment than Lamar Advertising. However, Lifeway Foods is 1.47 times more volatile than Lamar Advertising. It trades about -0.14 of its potential returns per unit of risk. Lamar Advertising is currently generating about -0.22 per unit of risk. If you would invest 2,320 in Lifeway Foods on October 17, 2024 and sell it today you would lose (140.00) from holding Lifeway Foods or give up 6.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Lifeway Foods vs. Lamar Advertising
Performance |
| Timeline |
| Lifeway Foods |
| Lamar Advertising |
Lifeway Foods and Lamar Advertising Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Lamar Advertising
The main advantage of trading using opposite Lifeway Foods and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Lamar Advertising 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 Lamar Advertising will offset losses from the drop in Lamar Advertising's long position.| Lifeway Foods vs. Nestl SA | Lifeway Foods vs. Kraft Heinz Co | Lifeway Foods vs. General Mills | Lifeway Foods vs. General Mills |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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