Correlation Between Lifeway Foods and United Natural

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

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

Diversification Opportunities for Lifeway Foods and United Natural

-0.44

Correlation Coefficient

Lifeway Foods  United Natural

Very good diversification

The 3 months correlation between Lifeway and United is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and United Natural go up and down completely randomly.

Pair Corralation between Lifeway Foods and United Natural

Assuming the 90 days horizon Lifeway Foods is expected to generate 1.34 times more return on investment than United Natural. However, Lifeway Foods is 1.34 times more volatile than United Natural Foods. It trades about 0.07 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.07 per unit of risk. If you would invest  1,080  in Lifeway Foods on October 5, 2024 and sell it today you would earn a total of  1,320  from holding Lifeway Foods or generate 122.22% return on investment over 90 days.

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

Lifeway Foods  vs.  United Natural Foods

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.

United Natural Foods

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days United Natural Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, United Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and United Natural

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

The idea behind Lifeway Foods and United Natural Foods 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.