Correlation Between Lifeway Foods and SHELL PLC
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and SHELL 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 SHELL 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 SHELL PLC WI, you can compare the effects of market volatilities on Lifeway Foods and SHELL 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 SHELL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and SHELL PLC.
Diversification Opportunities for Lifeway Foods and SHELL PLC
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lifeway and SHELL is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and SHELL PLC WI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHELL PLC WI 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 SHELL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHELL PLC WI has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and SHELL PLC go up and down completely randomly.
Pair Corralation between Lifeway Foods and SHELL PLC
Assuming the 90 days horizon Lifeway Foods is expected to generate 4.34 times more return on investment than SHELL PLC. However, Lifeway Foods is 4.34 times more volatile than SHELL PLC WI. It trades about 0.06 of its potential returns per unit of risk. SHELL PLC WI is currently generating about 0.05 per unit of risk. If you would invest 2,200 in Lifeway Foods on September 5, 2024 and sell it today you would earn a total of 100.00 from holding Lifeway Foods or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lifeway Foods vs. SHELL PLC WI
Performance |
| Timeline |
| Lifeway Foods |
| SHELL PLC WI |
Lifeway Foods and SHELL PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and SHELL PLC
The main advantage of trading using opposite Lifeway Foods and SHELL PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, SHELL 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 SHELL PLC will offset losses from the drop in SHELL PLC's long position.The idea behind Lifeway Foods and SHELL PLC WI pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SHELL PLC vs. Ebro Foods SA | SHELL PLC vs. USU Software AG | SHELL PLC vs. Lifeway Foods | SHELL PLC vs. Zoom Video Communications |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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