Correlation Between Lifeway Foods and BP Plc
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and BP Plc 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 BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and BP plc, you can compare the effects of market volatilities on Lifeway Foods and BP Plc 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 BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and BP Plc.
Diversification Opportunities for Lifeway Foods and BP Plc
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lifeway and BSU is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and BP Plc go up and down completely randomly.
Pair Corralation between Lifeway Foods and BP Plc
Assuming the 90 days horizon Lifeway Foods is expected to generate 2.77 times more return on investment than BP Plc. However, Lifeway Foods is 2.77 times more volatile than BP plc. It trades about 0.11 of its potential returns per unit of risk. BP plc is currently generating about -0.08 per unit of risk. If you would invest 1,790 in Lifeway Foods on September 2, 2024 and sell it today you would earn a total of 550.00 from holding Lifeway Foods or generate 30.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. BP plc
Performance |
| Timeline |
| Lifeway Foods |
| BP plc |
Lifeway Foods and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and BP Plc
The main advantage of trading using opposite Lifeway Foods and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| Lifeway Foods vs. Danone SA | Lifeway Foods vs. Superior Plus Corp | Lifeway Foods vs. NMI Holdings | Lifeway Foods vs. Origin Agritech |
| BP Plc vs. Lifeway Foods | BP Plc vs. CN MODERN DAIRY | BP Plc vs. Food Life Companies | BP Plc vs. ADRIATIC METALS LS 013355 |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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