Correlation Between Lifeway Foods and SHIN-ETSU CHEMICAL

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

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

Diversification Opportunities for Lifeway Foods and SHIN-ETSU CHEMICAL

0.45

Correlation Coefficient

Lifeway Foods  SHIN-ETSU CHEMICAL

Very weak diversification

The 3 months correlation between Lifeway and SHIN-ETSU is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL 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 SHIN-ETSU CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIN ETSU CHEMICAL has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and SHIN-ETSU CHEMICAL go up and down completely randomly.

Pair Corralation between Lifeway Foods and SHIN-ETSU CHEMICAL

Assuming the 90 days horizon Lifeway Foods is expected to generate 1.53 times more return on investment than SHIN-ETSU CHEMICAL. However, Lifeway Foods is 1.53 times more volatile than SHIN ETSU CHEMICAL. It trades about 0.01 of its potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about -0.33 per unit of risk. If you would invest  2,320  in Lifeway Foods on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Lifeway Foods or generate 0.0% return on investment over 90 days.

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

Lifeway Foods  vs.  SHIN ETSU CHEMICAL

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.

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lifeway Foods and SHIN-ETSU CHEMICAL

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

The idea behind Lifeway Foods and SHIN ETSU CHEMICAL 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 Transaction History module to view history of all your transactions and understand their impact on performance.