Correlation Between BOSTON BEER and Lifeway Foods

Can any of the company-specific risk be diversified away by investing in both BOSTON BEER 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 BOSTON BEER and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BOSTON BEER A and Lifeway Foods, you can compare the effects of market volatilities on BOSTON BEER 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 BOSTON BEER with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Lifeway Foods.

Diversification Opportunities for BOSTON BEER and Lifeway Foods

0.11

Correlation Coefficient

BOSTON BEER  Lifeway Foods

Average diversification

The 3 months correlation between BOSTON and Lifeway is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and BOSTON BEER 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 BOSTON BEER A 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 BOSTON BEER i.e., BOSTON BEER and Lifeway Foods go up and down completely randomly.

Pair Corralation between BOSTON BEER and Lifeway Foods

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 2.02 times less risky than Lifeway Foods. The stock trades about -0.12 of its potential returns per unit of risk. The Lifeway Foods is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,440  in Lifeway Foods on October 25, 2024 and sell it today you would lose (260.00) from holding Lifeway Foods or give up 10.66% of portfolio value over 90 days.

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

BOSTON BEER A   vs.  Lifeway Foods

BOSTON BEER A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOSTON BEER A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lifeway Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifeway Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BOSTON BEER and Lifeway Foods

The main advantage of trading using opposite BOSTON BEER and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER 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.

The idea behind BOSTON BEER A 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.