Correlation Between Waste Management and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Lifeway Foods, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Lifeway Foods.
Diversification Opportunities for Waste Management and Lifeway Foods
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Waste and Lifeway is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Lifeway Foods go up and down completely randomly.
Pair Corralation between Waste Management and Lifeway Foods
Assuming the 90 days trading horizon Waste Management is expected to generate 0.25 times more return on investment than Lifeway Foods. However, Waste Management is 4.05 times less risky than Lifeway Foods. It trades about 0.37 of its potential returns per unit of risk. Lifeway Foods is currently generating about 0.08 per unit of risk. If you would invest 19,626 in Waste Management on September 3, 2024 and sell it today you would earn a total of 1,959 from holding Waste Management or generate 9.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Lifeway Foods
Performance |
| Timeline |
| Waste Management |
| Lifeway Foods |
Waste Management and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Lifeway Foods
The main advantage of trading using opposite Waste Management and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. ANTA SPORTS PRODUCT | Waste Management vs. Gaztransport Technigaz SA | Waste Management vs. SCIENCE IN SPORT | Waste Management vs. SPORTING |
| Lifeway Foods vs. Nestl SA | Lifeway Foods vs. Kraft Heinz Co | Lifeway Foods vs. General Mills | 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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