Correlation Between Lifeway Foods and Vicinity Centres

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

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

Diversification Opportunities for Lifeway Foods and Vicinity Centres

0.22

Correlation Coefficient

Lifeway Foods  Vicinity Centres

Modest diversification

The 3 months correlation between Lifeway and Vicinity is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Vicinity Centres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Centres 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 Vicinity Centres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Centres has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Vicinity Centres go up and down completely randomly.

Pair Corralation between Lifeway Foods and Vicinity Centres

Assuming the 90 days horizon Lifeway Foods is expected to generate 5.74 times less return on investment than Vicinity Centres. In addition to that, Lifeway Foods is 2.82 times more volatile than Vicinity Centres. It trades about 0.01 of its total potential returns per unit of risk. Vicinity Centres is currently generating about 0.16 per unit of volatility. If you would invest  120.00  in Vicinity Centres on October 27, 2024 and sell it today you would earn a total of  3.00  from holding Vicinity Centres or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Lifeway Foods  vs.  Vicinity Centres

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vicinity Centres

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vicinity Centres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vicinity Centres 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 Vicinity Centres

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

The idea behind Lifeway Foods and Vicinity Centres 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.