Correlation Between Lifeway Foods and Constellation Software
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Constellation Software 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 Constellation Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Constellation Software, you can compare the effects of market volatilities on Lifeway Foods and Constellation Software 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 Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Constellation Software.
Diversification Opportunities for Lifeway Foods and Constellation Software
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lifeway and Constellation is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Constellation Software go up and down completely randomly.
Pair Corralation between Lifeway Foods and Constellation Software
Assuming the 90 days horizon Lifeway Foods is expected to under-perform the Constellation Software. In addition to that, Lifeway Foods is 1.27 times more volatile than Constellation Software. It trades about -0.07 of its total potential returns per unit of risk. Constellation Software is currently generating about -0.07 per unit of volatility. If you would invest 318,893 in Constellation Software on October 30, 2024 and sell it today you would lose (14,893) from holding Constellation Software or give up 4.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifeway Foods vs. Constellation Software
Performance |
| Timeline |
| Lifeway Foods |
| Constellation Software |
Lifeway Foods and Constellation Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifeway Foods and Constellation Software
The main advantage of trading using opposite Lifeway Foods and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Constellation Software 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 Constellation Software will offset losses from the drop in Constellation Software's long position.| Lifeway Foods vs. General Mills | Lifeway Foods vs. Danone SA | Lifeway Foods vs. Hormel Foods | Lifeway Foods vs. Kellogg Company |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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