Correlation Between Lifeway Foods and Nufarm
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Nufarm 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 Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Nufarm Limited, you can compare the effects of market volatilities on Lifeway Foods and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Nufarm.
Diversification Opportunities for Lifeway Foods and Nufarm
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lifeway and Nufarm is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Nufarm go up and down completely randomly.
Pair Corralation between Lifeway Foods and Nufarm
Assuming the 90 days horizon Lifeway Foods is expected to generate 2.96 times more return on investment than Nufarm. However, Lifeway Foods is 2.96 times more volatile than Nufarm Limited. It trades about 0.07 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.04 per unit of risk. If you would invest 1,190 in Lifeway Foods on September 4, 2024 and sell it today you would earn a total of 1,150 from holding Lifeway Foods or generate 96.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Nufarm Limited
Performance |
| Timeline |
| Lifeway Foods |
| Nufarm Limited |
Lifeway Foods and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Nufarm
The main advantage of trading using opposite Lifeway Foods and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.The idea behind Lifeway Foods and Nufarm Limited 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.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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