Correlation Between Lifeway Foods and NIPPON MEAT

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

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

Diversification Opportunities for Lifeway Foods and NIPPON MEAT

0.34

Correlation Coefficient

Lifeway Foods  NIPPON MEAT

Weak diversification

The 3 months correlation between Lifeway and NIPPON is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and NIPPON MEAT PACKERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON MEAT PACKERS 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 NIPPON MEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON MEAT PACKERS has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and NIPPON MEAT go up and down completely randomly.

Pair Corralation between Lifeway Foods and NIPPON MEAT

Assuming the 90 days horizon Lifeway Foods is expected to generate 11.3 times less return on investment than NIPPON MEAT. In addition to that, Lifeway Foods is 1.57 times more volatile than NIPPON MEAT PACKERS. It trades about 0.0 of its total potential returns per unit of risk. NIPPON MEAT PACKERS is currently generating about 0.04 per unit of volatility. If you would invest  2,978  in NIPPON MEAT PACKERS on December 30, 2024 and sell it today you would earn a total of  102.00  from holding NIPPON MEAT PACKERS or generate 3.43% return on investment over 90 days.

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

Lifeway Foods  vs.  NIPPON MEAT PACKERS

Lifeway Foods

Risk-Adjusted Performance

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.

NIPPON MEAT PACKERS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON MEAT PACKERS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, NIPPON MEAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lifeway Foods and NIPPON MEAT

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

The idea behind Lifeway Foods and NIPPON MEAT PACKERS 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.