Correlation Between Lifeway Foods and Nabors Industries

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

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

Diversification Opportunities for Lifeway Foods and Nabors Industries

0.19

Correlation Coefficient

Lifeway Foods  Nabors Industries

Average diversification

The 3 months correlation between Lifeway and Nabors is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Nabors Industries go up and down completely randomly.

Pair Corralation between Lifeway Foods and Nabors Industries

Assuming the 90 days horizon Lifeway Foods is expected to generate 0.33 times more return on investment than Nabors Industries. However, Lifeway Foods is 3.03 times less risky than Nabors Industries. It trades about 0.11 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.06 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lifeway Foods  vs.  Nabors Industries

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

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lifeway Foods and Nabors Industries

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

The idea behind Lifeway Foods and Nabors Industries 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.