Correlation Between Lifeway Foods and Danone SA
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Danone SA 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 Danone SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Danone SA, you can compare the effects of market volatilities on Lifeway Foods and Danone SA 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 Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Danone SA.
Diversification Opportunities for Lifeway Foods and Danone SA
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lifeway and Danone is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA 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 Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Danone SA go up and down completely randomly.
Pair Corralation between Lifeway Foods and Danone SA
Assuming the 90 days horizon Lifeway Foods is expected to generate 5.68 times more return on investment than Danone SA. However, Lifeway Foods is 5.68 times more volatile than Danone SA. It trades about 0.07 of its potential returns per unit of risk. Danone SA is currently generating about 0.06 per unit of risk. If you would invest 1,240 in Lifeway Foods on September 2, 2024 and sell it today you would earn a total of 1,100 from holding Lifeway Foods or generate 88.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Danone SA
Performance |
| Timeline |
| Lifeway Foods |
| Danone SA |
Lifeway Foods and Danone SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Danone SA
The main advantage of trading using opposite Lifeway Foods and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Danone SA 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 Danone SA will offset losses from the drop in Danone SA's long position.| Lifeway Foods vs. Danone SA | Lifeway Foods vs. Superior Plus Corp | Lifeway Foods vs. NMI Holdings | Lifeway Foods vs. Origin Agritech |
| Danone SA vs. Superior Plus Corp | Danone SA vs. NMI Holdings | Danone SA vs. Origin Agritech | Danone SA vs. SIVERS SEMICONDUCTORS AB |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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