Correlation Between Grand Canyon and Lifeway Foods

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

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

Diversification Opportunities for Grand Canyon and Lifeway Foods

-0.72

Correlation Coefficient

Grand Canyon  Lifeway Foods

Pay attention - limited upside

The 3 months correlation between Grand and Lifeway is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and Lifeway Foods go up and down completely randomly.

Pair Corralation between Grand Canyon and Lifeway Foods

Assuming the 90 days trading horizon Grand Canyon Education is expected to generate 0.83 times more return on investment than Lifeway Foods. However, Grand Canyon Education is 1.21 times less risky than Lifeway Foods. It trades about 0.13 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.22 per unit of risk. If you would invest  16,400  in Grand Canyon Education on November 29, 2024 and sell it today you would earn a total of  700.00  from holding Grand Canyon Education or generate 4.27% return on investment over 90 days.

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

Grand Canyon Education  vs.  Lifeway Foods

Grand Canyon Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Grand Canyon may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Lifeway Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lifeway Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Grand Canyon and Lifeway Foods

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

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.