Correlation Between Lifeway Foods and RBC Bearings

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

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

Diversification Opportunities for Lifeway Foods and RBC Bearings

-0.31

Correlation Coefficient

Lifeway Foods  RBC Bearings

Very good diversification

The 3 months correlation between Lifeway and RBC is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and RBC Bearings go up and down completely randomly.

Pair Corralation between Lifeway Foods and RBC Bearings

Assuming the 90 days horizon Lifeway Foods is expected to under-perform the RBC Bearings. In addition to that, Lifeway Foods is 1.63 times more volatile than RBC Bearings Incorporated. It trades about -0.08 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.03 per unit of volatility. If you would invest  29,800  in RBC Bearings Incorporated on December 20, 2024 and sell it today you would earn a total of  800.00  from holding RBC Bearings Incorporated or generate 2.68% return on investment over 90 days.

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

Lifeway Foods  vs.  RBC Bearings Incorporated

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.

RBC Bearings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RBC Bearings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lifeway Foods and RBC Bearings

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

The idea behind Lifeway Foods and RBC Bearings Incorporated 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.