Correlation Between Origin Materials and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Origin Materials and Lifeway Foods 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 Origin Materials and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Materials and Lifeway Foods, you can compare the effects of market volatilities on Origin Materials and Lifeway Foods 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 Origin Materials with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Materials and Lifeway Foods.
Diversification Opportunities for Origin Materials and Lifeway Foods
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Origin and Lifeway is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Origin Materials 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 Origin Materials are associated (or correlated) with Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Origin Materials i.e., Origin Materials and Lifeway Foods go up and down completely randomly.
Pair Corralation between Origin Materials and Lifeway Foods
Given the investment horizon of 90 days Origin Materials is expected to under-perform the Lifeway Foods. In addition to that, Origin Materials is 2.02 times more volatile than Lifeway Foods. It trades about -0.45 of its total potential returns per unit of risk. Lifeway Foods is currently generating about -0.21 per unit of volatility. If you would invest 2,480 in Lifeway Foods on November 1, 2024 and sell it today you would lose (151.00) from holding Lifeway Foods or give up 6.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Origin Materials vs. Lifeway Foods
Performance |
| Timeline |
| Origin Materials |
| Lifeway Foods |
Origin Materials and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Materials and Lifeway Foods
The main advantage of trading using opposite Origin Materials and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Materials position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| Origin Materials vs. Tronox Holdings PLC | Origin Materials vs. Valhi Inc | Origin Materials vs. Lsb Industries | Origin Materials vs. Huntsman |
| Lifeway Foods vs. Seneca Foods Corp | Lifeway Foods vs. Central Garden Pet | Lifeway Foods vs. Central Garden Pet | Lifeway Foods vs. Lifevantage |
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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