Correlation Between Lifeway Foods and Bank of China
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Bank of China 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 Bank of China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Bank of China, you can compare the effects of market volatilities on Lifeway Foods and Bank of China 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 Bank of China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Bank of China.
Diversification Opportunities for Lifeway Foods and Bank of China
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lifeway and Bank is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China 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 Bank of China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Bank of China go up and down completely randomly.
Pair Corralation between Lifeway Foods and Bank of China
Assuming the 90 days horizon Lifeway Foods is expected to generate 2.08 times more return on investment than Bank of China. However, Lifeway Foods is 2.08 times more volatile than Bank of China. It trades about 0.11 of its potential returns per unit of risk. Bank of China is currently generating about 0.14 per unit of risk. If you would invest 2,120 in Lifeway Foods on September 12, 2024 and sell it today you would earn a total of 200.00 from holding Lifeway Foods or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Bank of China
Performance |
| Timeline |
| Lifeway Foods |
| Bank of China |
Lifeway Foods and Bank of China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Bank of China
The main advantage of trading using opposite Lifeway Foods and Bank of China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Bank of China 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 Bank of China will offset losses from the drop in Bank of China'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 |
| Bank of China vs. Constellation Software | Bank of China vs. PSI Software AG | Bank of China vs. Lifeway Foods | Bank of China vs. Take Two Interactive Software |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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