Correlation Between Lifeway Foods and AECOM

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

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

Diversification Opportunities for Lifeway Foods and AECOM

-0.46

Correlation Coefficient

Lifeway Foods  AECOM

Very good diversification

The 3 months correlation between Lifeway and AECOM is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and AECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM 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 AECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and AECOM go up and down completely randomly.

Pair Corralation between Lifeway Foods and AECOM

Assuming the 90 days horizon Lifeway Foods is expected to generate 1.97 times more return on investment than AECOM. However, Lifeway Foods is 1.97 times more volatile than AECOM. It trades about 0.11 of its potential returns per unit of risk. AECOM is currently generating about -0.24 per unit of risk. If you would invest  2,320  in Lifeway Foods on October 9, 2024 and sell it today you would earn a total of  80.00  from holding Lifeway Foods or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

Lifeway Foods  vs.  AECOM

Lifeway Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

AECOM

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AECOM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lifeway Foods and AECOM

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

The idea behind Lifeway Foods and AECOM 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.