Correlation Between Lifeway Foods and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Chongqing Machinery 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 Chongqing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Chongqing Machinery Electric, you can compare the effects of market volatilities on Lifeway Foods and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Chongqing Machinery.
Diversification Opportunities for Lifeway Foods and Chongqing Machinery
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lifeway and Chongqing is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Chongqing Machinery go up and down completely randomly.
Pair Corralation between Lifeway Foods and Chongqing Machinery
Assuming the 90 days horizon Lifeway Foods is expected to generate 1.45 times more return on investment than Chongqing Machinery. However, Lifeway Foods is 1.45 times more volatile than Chongqing Machinery Electric. It trades about 0.02 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.01 per unit of risk. If you would invest 2,260 in Lifeway Foods on September 14, 2024 and sell it today you would earn a total of 0.00 from holding Lifeway Foods or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Chongqing Machinery Electric
Performance |
| Timeline |
| Lifeway Foods |
| Chongqing Machinery |
Lifeway Foods and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Chongqing Machinery
The main advantage of trading using opposite Lifeway Foods and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| Lifeway Foods vs. Hormel Foods | Lifeway Foods vs. Superior Plus Corp | Lifeway Foods vs. SIVERS SEMICONDUCTORS AB | Lifeway Foods vs. NorAm Drilling AS |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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