Correlation Between Lifeway Foods and Pure Storage

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

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

Diversification Opportunities for Lifeway Foods and Pure Storage

0.0

Correlation Coefficient

Lifeway Foods  Pure Storage

Pay attention - limited upside

The 3 months correlation between Lifeway and Pure is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Pure Storage go up and down completely randomly.

Pair Corralation between Lifeway Foods and Pure Storage

Assuming the 90 days horizon Lifeway Foods is expected to under-perform the Pure Storage. But the stock apears to be less risky and, when comparing its historical volatility, Lifeway Foods is 3.02 times less risky than Pure Storage. The stock trades about -0.12 of its potential returns per unit of risk. The Pure Storage is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,986  in Pure Storage on September 25, 2024 and sell it today you would earn a total of  975.00  from holding Pure Storage or generate 19.55% return on investment over 90 days.

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

Lifeway Foods  vs.  Pure Storage

Lifeway Foods

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Lifeway Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lifeway Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pure Storage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and Pure Storage

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

The idea behind Lifeway Foods and Pure Storage 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.