Correlation Between Lifeway Foods and Takeda Pharmaceutical

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

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

Diversification Opportunities for Lifeway Foods and Takeda Pharmaceutical

-0.18

Correlation Coefficient

Lifeway Foods  Takeda Pharmaceutical

Good diversification

The 3 months correlation between Lifeway and Takeda is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Takeda Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical 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 Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between Lifeway Foods and Takeda Pharmaceutical

Assuming the 90 days horizon Lifeway Foods is expected to generate 3.7 times more return on investment than Takeda Pharmaceutical. However, Lifeway Foods is 3.7 times more volatile than Takeda Pharmaceutical. It trades about 0.07 of its potential returns per unit of risk. Takeda Pharmaceutical is currently generating about 0.01 per unit of risk. If you would invest  575.00  in Lifeway Foods on December 2, 2024 and sell it today you would earn a total of  1,425  from holding Lifeway Foods or generate 247.83% return on investment over 90 days.

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

Lifeway Foods  vs.  Takeda Pharmaceutical

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Takeda Pharmaceutical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Takeda Pharmaceutical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Takeda Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lifeway Foods and Takeda Pharmaceutical

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

The idea behind Lifeway Foods and Takeda Pharmaceutical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.