Correlation Between TreeHouse Foods and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both TreeHouse Foods 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 TreeHouse Foods and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TreeHouse Foods and Lifeway Foods, you can compare the effects of market volatilities on TreeHouse Foods 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 TreeHouse Foods with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of TreeHouse Foods and Lifeway Foods.
Diversification Opportunities for TreeHouse Foods and Lifeway Foods
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TreeHouse and Lifeway is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding TreeHouse Foods and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and TreeHouse 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 TreeHouse Foods 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 TreeHouse Foods i.e., TreeHouse Foods and Lifeway Foods go up and down completely randomly.
Pair Corralation between TreeHouse Foods and Lifeway Foods
Assuming the 90 days horizon TreeHouse Foods is expected to generate 0.75 times more return on investment than Lifeway Foods. However, TreeHouse Foods is 1.33 times less risky than Lifeway Foods. It trades about 0.0 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.02 per unit of risk. If you would invest 3,340 in TreeHouse Foods on September 2, 2024 and sell it today you would lose (60.00) from holding TreeHouse Foods or give up 1.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TreeHouse Foods vs. Lifeway Foods
Performance |
| Timeline |
| TreeHouse Foods |
| Lifeway Foods |
TreeHouse Foods and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TreeHouse Foods and Lifeway Foods
The main advantage of trading using opposite TreeHouse Foods and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TreeHouse Foods 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.| TreeHouse Foods vs. Danone SA | TreeHouse Foods vs. Superior Plus Corp | TreeHouse Foods vs. NMI Holdings | TreeHouse Foods vs. Origin Agritech |
| Lifeway Foods vs. Danone SA | Lifeway Foods vs. Superior Plus Corp | Lifeway Foods vs. NMI Holdings | Lifeway Foods vs. Origin Agritech |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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