Correlation Between Lifeway Foods and BYD Company
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and BYD Company 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 BYD Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and BYD Company Limited, you can compare the effects of market volatilities on Lifeway Foods and BYD Company 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 BYD Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and BYD Company.
Diversification Opportunities for Lifeway Foods and BYD Company
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lifeway and BYD is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited 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 BYD Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Limited has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and BYD Company go up and down completely randomly.
Pair Corralation between Lifeway Foods and BYD Company
Assuming the 90 days horizon Lifeway Foods is expected to generate 1.53 times more return on investment than BYD Company. However, Lifeway Foods is 1.53 times more volatile than BYD Company Limited. It trades about 0.13 of its potential returns per unit of risk. BYD Company Limited is currently generating about 0.11 per unit of risk. If you would invest 1,740 in Lifeway Foods on September 3, 2024 and sell it today you would earn a total of 600.00 from holding Lifeway Foods or generate 34.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. BYD Company Limited
Performance |
| Timeline |
| Lifeway Foods |
| BYD Limited |
Lifeway Foods and BYD Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and BYD Company
The main advantage of trading using opposite Lifeway Foods and BYD Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, BYD Company 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 BYD Company will offset losses from the drop in BYD Company's long position.| Lifeway Foods vs. Nestl SA | Lifeway Foods vs. Kraft Heinz Co | Lifeway Foods vs. General Mills | Lifeway Foods vs. Kellogg Company |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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