Correlation Between AIR PRODCHEMICALS and LIFEWAY FOODS

Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS 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 AIR PRODCHEMICALS and LIFEWAY FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIR PRODCHEMICALS and LIFEWAY FOODS, you can compare the effects of market volatilities on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS with a short position of LIFEWAY FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and LIFEWAY FOODS.

Diversification Opportunities for AIR PRODCHEMICALS and LIFEWAY FOODS

0.74

Correlation Coefficient

AIR PRODCHEMICALS  LIFEWAY FOODS

Poor diversification

The 3 months correlation between AIR and LIFEWAY is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and LIFEWAY FOODS go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and LIFEWAY FOODS

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.29 times more return on investment than LIFEWAY FOODS. However, AIR PRODCHEMICALS is 3.41 times less risky than LIFEWAY FOODS. It trades about 0.49 of its potential returns per unit of risk. LIFEWAY FOODS is currently generating about 0.03 per unit of risk. If you would invest  28,460  in AIR PRODCHEMICALS on September 3, 2024 and sell it today you would earn a total of  3,170  from holding AIR PRODCHEMICALS or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

AIR PRODCHEMICALS  vs.  LIFEWAY FOODS

AIR PRODCHEMICALS

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AIR PRODCHEMICALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

LIFEWAY FOODS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIFEWAY FOODS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, LIFEWAY FOODS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIR PRODCHEMICALS and LIFEWAY FOODS

The main advantage of trading using opposite AIR PRODCHEMICALS and LIFEWAY FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS 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's long position.

The idea behind AIR PRODCHEMICALS and LIFEWAY FOODS 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.