Correlation Between Lifeway Foods and Kemper

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

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

Diversification Opportunities for Lifeway Foods and Kemper

-0.54

Correlation Coefficient

Lifeway Foods  Kemper

Excellent diversification

The 3 months correlation between Lifeway and Kemper is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Kemper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemper 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 Kemper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemper has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Kemper go up and down completely randomly.

Pair Corralation between Lifeway Foods and Kemper

Assuming the 90 days horizon Lifeway Foods is expected to under-perform the Kemper. In addition to that, Lifeway Foods is 1.24 times more volatile than Kemper. It trades about -0.03 of its total potential returns per unit of risk. Kemper is currently generating about -0.04 per unit of volatility. If you would invest  6,300  in Kemper on October 12, 2024 and sell it today you would lose (100.00) from holding Kemper or give up 1.59% of portfolio value over 90 days.

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

Lifeway Foods  vs.  Kemper

Lifeway Foods

Risk-Adjusted Performance

0 of 100

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

Kemper

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kemper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and Kemper

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

The idea behind Lifeway Foods and Kemper 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.