Correlation Between Lifeway Foods and ELECOM
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and ELECOM 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 ELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and ELECOM LTD, you can compare the effects of market volatilities on Lifeway Foods and ELECOM 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 ELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and ELECOM.
Diversification Opportunities for Lifeway Foods and ELECOM
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lifeway and ELECOM is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and ELECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECOM LTD 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 ELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECOM LTD has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and ELECOM go up and down completely randomly.
Pair Corralation between Lifeway Foods and ELECOM
Assuming the 90 days horizon Lifeway Foods is expected to generate 3.76 times more return on investment than ELECOM. However, Lifeway Foods is 3.76 times more volatile than ELECOM LTD. It trades about 0.01 of its potential returns per unit of risk. ELECOM LTD is currently generating about -0.05 per unit of risk. If you would invest 2,320 in Lifeway Foods on August 30, 2024 and sell it today you would lose (20.00) from holding Lifeway Foods or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. ELECOM LTD
Performance |
| Timeline |
| Lifeway Foods |
| ELECOM LTD |
Lifeway Foods and ELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and ELECOM
The main advantage of trading using opposite Lifeway Foods and ELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, ELECOM 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 ELECOM will offset losses from the drop in ELECOM's long position.| Lifeway Foods vs. COMINTL BANK ADR1 | Lifeway Foods vs. CDN IMPERIAL BANK | Lifeway Foods vs. Chiba Bank | Lifeway Foods vs. Gamma Communications plc |
| ELECOM vs. PKSHA TECHNOLOGY INC | ELECOM vs. SMA Solar Technology | ELECOM vs. Micron Technology | ELECOM vs. Lifeway Foods |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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