Correlation Between LIFEWAY FOODS and Adidas AG

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

By analyzing existing cross correlation between LIFEWAY FOODS and adidas AG, you can compare the effects of market volatilities on LIFEWAY FOODS and Adidas AG 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 Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFEWAY FOODS and Adidas AG.

Diversification Opportunities for LIFEWAY FOODS and Adidas AG

-0.37

Correlation Coefficient

LIFEWAY FOODS  Adidas AG

Very good diversification

The 3 months correlation between LIFEWAY and Adidas is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding LIFEWAY FOODS and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of LIFEWAY FOODS i.e., LIFEWAY FOODS and Adidas AG go up and down completely randomly.

Pair Corralation between LIFEWAY FOODS and Adidas AG

Assuming the 90 days trading horizon LIFEWAY FOODS is expected to generate 3.34 times more return on investment than Adidas AG. However, LIFEWAY FOODS is 3.34 times more volatile than adidas AG. It trades about 0.09 of its potential returns per unit of risk. adidas AG is currently generating about 0.07 per unit of risk. If you would invest  910.00  in LIFEWAY FOODS on October 22, 2024 and sell it today you would earn a total of  1,150  from holding LIFEWAY FOODS or generate 126.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

LIFEWAY FOODS  vs.  adidas AG

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

adidas AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Adidas AG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LIFEWAY FOODS and Adidas AG

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

The idea behind LIFEWAY FOODS and adidas AG 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.