Correlation Between Lifeway Foods and Cadence Design

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

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

Diversification Opportunities for Lifeway Foods and Cadence Design

-0.64

Correlation Coefficient

Lifeway Foods  Cadence Design

Excellent diversification

The 3 months correlation between Lifeway and Cadence is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems 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 Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Cadence Design go up and down completely randomly.

Pair Corralation between Lifeway Foods and Cadence Design

Assuming the 90 days horizon Lifeway Foods is expected to under-perform the Cadence Design. In addition to that, Lifeway Foods is 1.74 times more volatile than Cadence Design Systems. It trades about -0.01 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about 0.11 per unit of volatility. If you would invest  29,050  in Cadence Design Systems on October 24, 2024 and sell it today you would earn a total of  750.00  from holding Cadence Design Systems or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Lifeway Foods  vs.  Cadence Design Systems

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cadence Design Systems

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Cadence Design reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and Cadence Design

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

The idea behind Lifeway Foods and Cadence Design Systems 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.