Correlation Between Lifeway Foods and Simply Good

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

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

Diversification Opportunities for Lifeway Foods and Simply Good

-0.79

Correlation Coefficient

Lifeway Foods  Simply Good

Pay attention - limited upside

The 3 months correlation between Lifeway and Simply is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Simply Good Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simply Good Foods and Lifeway 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 Lifeway Foods are associated (or correlated) with Simply Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simply Good Foods has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Simply Good go up and down completely randomly.

Pair Corralation between Lifeway Foods and Simply Good

Given the investment horizon of 90 days Lifeway Foods is expected to under-perform the Simply Good. In addition to that, Lifeway Foods is 2.54 times more volatile than Simply Good Foods. It trades about -0.02 of its total potential returns per unit of risk. Simply Good Foods is currently generating about 0.23 per unit of volatility. If you would invest  3,567  in Simply Good Foods on October 8, 2024 and sell it today you would earn a total of  383.00  from holding Simply Good Foods or generate 10.74% return on investment over 90 days.

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

Lifeway Foods  vs.  Simply Good Foods

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Simply Good Foods

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Good Foods are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Simply Good disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and Simply Good

The main advantage of trading using opposite Lifeway Foods and Simply Good positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Simply Good 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 Simply Good will offset losses from the drop in Simply Good's long position.

The idea behind Lifeway Foods and Simply Good 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.