Correlation Between Lifeway Foods and BANK OCHINA
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and BANK OCHINA 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 OCHINA 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 OCHINA H, you can compare the effects of market volatilities on Lifeway Foods and BANK OCHINA 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 OCHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and BANK OCHINA.
Diversification Opportunities for Lifeway Foods and BANK OCHINA
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lifeway and BANK is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and BANK OCHINA H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OCHINA H 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 OCHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OCHINA H has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and BANK OCHINA go up and down completely randomly.
Pair Corralation between Lifeway Foods and BANK OCHINA
Assuming the 90 days horizon Lifeway Foods is expected to generate 3.16 times more return on investment than BANK OCHINA. However, Lifeway Foods is 3.16 times more volatile than BANK OCHINA H. It trades about 0.06 of its potential returns per unit of risk. BANK OCHINA H is currently generating about 0.01 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 | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lifeway Foods vs. BANK OCHINA H
Performance |
| Timeline |
| Lifeway Foods |
| BANK OCHINA H |
Lifeway Foods and BANK OCHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and BANK OCHINA
The main advantage of trading using opposite Lifeway Foods and BANK OCHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, BANK OCHINA 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 OCHINA will offset losses from the drop in BANK OCHINA's long position.The idea behind Lifeway Foods and BANK OCHINA H 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.| BANK OCHINA vs. SMA Solar Technology | BANK OCHINA vs. DXC Technology Co | BANK OCHINA vs. Lifeway Foods | BANK OCHINA vs. Micron Technology |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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