Correlation Between Lifeway Foods and Ares Management

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

By analyzing existing cross correlation between Lifeway Foods and Ares Management Corp, you can compare the effects of market volatilities on Lifeway Foods and Ares Management 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 Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Ares Management.

Diversification Opportunities for Lifeway Foods and Ares Management

-0.5

Correlation Coefficient

Lifeway Foods  Ares Management

Very good diversification

The 3 months correlation between Lifeway and Ares is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Ares Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management Corp 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 Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management Corp has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Ares Management go up and down completely randomly.

Pair Corralation between Lifeway Foods and Ares Management

Assuming the 90 days horizon Lifeway Foods is expected to generate 2.96 times more return on investment than Ares Management. However, Lifeway Foods is 2.96 times more volatile than Ares Management Corp. It trades about 0.08 of its potential returns per unit of risk. Ares Management Corp is currently generating about 0.12 per unit of risk. If you would invest  615.00  in Lifeway Foods on October 22, 2024 and sell it today you would earn a total of  1,565  from holding Lifeway Foods or generate 254.47% return on investment over 90 days.

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

Lifeway Foods  vs.  Ares Management Corp

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 fragile 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.

Ares Management Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ares Management reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and Ares Management

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

The idea behind Lifeway Foods and Ares Management Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.