Correlation Between Lifeway Foods and Diamondrock Hospitality
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Diamondrock Hospitality 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 Diamondrock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Diamondrock Hospitality Co, you can compare the effects of market volatilities on Lifeway Foods and Diamondrock Hospitality 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 Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Diamondrock Hospitality.
Diversification Opportunities for Lifeway Foods and Diamondrock Hospitality
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lifeway and Diamondrock is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Diamondrock Hospitality Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality 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 Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Diamondrock Hospitality go up and down completely randomly.
Pair Corralation between Lifeway Foods and Diamondrock Hospitality
Assuming the 90 days horizon Lifeway Foods is expected to generate 2.64 times more return on investment than Diamondrock Hospitality. However, Lifeway Foods is 2.64 times more volatile than Diamondrock Hospitality Co. It trades about 0.08 of its potential returns per unit of risk. Diamondrock Hospitality Co is currently generating about 0.02 per unit of risk. If you would invest 625.00 in Lifeway Foods on September 4, 2024 and sell it today you would earn a total of 1,715 from holding Lifeway Foods or generate 274.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lifeway Foods vs. Diamondrock Hospitality Co
Performance |
| Timeline |
| Lifeway Foods |
| Diamondrock Hospitality |
Lifeway Foods and Diamondrock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Diamondrock Hospitality
The main advantage of trading using opposite Lifeway Foods and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Diamondrock Hospitality 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 Diamondrock Hospitality will offset losses from the drop in Diamondrock Hospitality'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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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