Correlation Between Lifeway Foods and DOCDATA

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

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

Diversification Opportunities for Lifeway Foods and DOCDATA

0.31

Correlation Coefficient

Lifeway Foods  DOCDATA

Weak diversification

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

Pair Corralation between Lifeway Foods and DOCDATA

Assuming the 90 days horizon Lifeway Foods is expected to generate 0.64 times more return on investment than DOCDATA. However, Lifeway Foods is 1.57 times less risky than DOCDATA. It trades about -0.12 of its potential returns per unit of risk. DOCDATA is currently generating about -0.18 per unit of risk. If you would invest  2,320  in Lifeway Foods on September 26, 2024 and sell it today you would lose (120.00) from holding Lifeway Foods or give up 5.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lifeway Foods  vs.  DOCDATA

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.

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lifeway Foods and DOCDATA

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

The idea behind Lifeway Foods and DOCDATA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.