Correlation Between Lifeway Foods and Broadwind

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

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

Diversification Opportunities for Lifeway Foods and Broadwind

0.43

Correlation Coefficient

Lifeway Foods  Broadwind

Very weak diversification

The 3 months correlation between Lifeway and Broadwind is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind 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 Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Broadwind go up and down completely randomly.

Pair Corralation between Lifeway Foods and Broadwind

Assuming the 90 days horizon Lifeway Foods is expected to under-perform the Broadwind. But the stock apears to be less risky and, when comparing its historical volatility, Lifeway Foods is 1.37 times less risky than Broadwind. The stock trades about -0.01 of its potential returns per unit of risk. The Broadwind is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  177.00  in Broadwind on October 4, 2024 and sell it today you would lose (1.00) from holding Broadwind or give up 0.56% of portfolio value over 90 days.

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

Lifeway Foods  vs.  Broadwind

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 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.

Broadwind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lifeway Foods and Broadwind

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

The idea behind Lifeway Foods and Broadwind 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.