Correlation Between Lifeway Foods and BROADWIND ENRGY

Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and BROADWIND ENRGY 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 ENRGY 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 ENRGY, you can compare the effects of market volatilities on Lifeway Foods and BROADWIND ENRGY 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 ENRGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and BROADWIND ENRGY.

Diversification Opportunities for Lifeway Foods and BROADWIND ENRGY

0.52

Correlation Coefficient

Lifeway Foods  BROADWIND ENRGY

Very weak diversification

The 3 months correlation between Lifeway and BROADWIND is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY 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 ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between Lifeway Foods and BROADWIND ENRGY

Assuming the 90 days horizon Lifeway Foods is expected to under-perform the BROADWIND ENRGY. But the stock apears to be less risky and, when comparing its historical volatility, Lifeway Foods is 1.84 times less risky than BROADWIND ENRGY. The stock trades about -0.16 of its potential returns per unit of risk. The BROADWIND ENRGY is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  169.00  in BROADWIND ENRGY on December 4, 2024 and sell it today you would lose (27.00) from holding BROADWIND ENRGY or give up 15.98% 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 ENRGY

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BROADWIND ENRGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days BROADWIND ENRGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lifeway Foods and BROADWIND ENRGY

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

The idea behind Lifeway Foods and BROADWIND ENRGY 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.