Correlation Between Lifeway Foods and Indutrade
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Indutrade 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 Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Indutrade AB, you can compare the effects of market volatilities on Lifeway Foods and Indutrade 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 Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Indutrade.
Diversification Opportunities for Lifeway Foods and Indutrade
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lifeway and Indutrade is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB 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 Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Indutrade go up and down completely randomly.
Pair Corralation between Lifeway Foods and Indutrade
Assuming the 90 days horizon Lifeway Foods is expected to under-perform the Indutrade. In addition to that, Lifeway Foods is 3.72 times more volatile than Indutrade AB. It trades about -0.14 of its total potential returns per unit of risk. Indutrade AB is currently generating about -0.14 per unit of volatility. If you would invest 2,430 in Indutrade AB on October 17, 2024 and sell it today you would lose (36.00) from holding Indutrade AB or give up 1.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Indutrade AB
Performance |
| Timeline |
| Lifeway Foods |
| Indutrade AB |
Lifeway Foods and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Indutrade
The main advantage of trading using opposite Lifeway Foods and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| Lifeway Foods vs. Nestl SA | Lifeway Foods vs. Kraft Heinz Co | Lifeway Foods vs. General Mills | Lifeway Foods vs. General Mills |
| Indutrade vs. SENECA FOODS A | Indutrade vs. Webster Financial | Indutrade vs. Virtu Financial | Indutrade vs. Lifeway Foods |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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