Correlation Between Lifeway Foods and CosmoSteel Holdings

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

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

Diversification Opportunities for Lifeway Foods and CosmoSteel Holdings

-0.08

Correlation Coefficient

Lifeway Foods  CosmoSteel Holdings

Good diversification

The 3 months correlation between Lifeway and CosmoSteel is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings 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 CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and CosmoSteel Holdings go up and down completely randomly.

Pair Corralation between Lifeway Foods and CosmoSteel Holdings

Assuming the 90 days horizon Lifeway Foods is expected to generate 1.84 times more return on investment than CosmoSteel Holdings. However, Lifeway Foods is 1.84 times more volatile than CosmoSteel Holdings Limited. It trades about 0.08 of its potential returns per unit of risk. CosmoSteel Holdings Limited is currently generating about 0.0 per unit of risk. If you would invest  520.00  in Lifeway Foods on September 26, 2024 and sell it today you would earn a total of  1,680  from holding Lifeway Foods or generate 323.08% 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.  CosmoSteel Holdings Limited

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.

CosmoSteel Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CosmoSteel Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lifeway Foods and CosmoSteel Holdings

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

The idea behind Lifeway Foods and CosmoSteel Holdings Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.