Correlation Between LIFEWAY FOODS and AIR PRODCHEMICALS

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

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

Diversification Opportunities for LIFEWAY FOODS and AIR PRODCHEMICALS

0.74

Correlation Coefficient

LIFEWAY FOODS  AIR PRODCHEMICALS

Poor diversification

The 3 months correlation between LIFEWAY and AIR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding LIFEWAY FOODS and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of LIFEWAY FOODS i.e., LIFEWAY FOODS and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between LIFEWAY FOODS and AIR PRODCHEMICALS

Assuming the 90 days trading horizon LIFEWAY FOODS is expected to generate 5.02 times less return on investment than AIR PRODCHEMICALS. In addition to that, LIFEWAY FOODS is 3.41 times more volatile than AIR PRODCHEMICALS. It trades about 0.03 of its total potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.49 per unit of volatility. If you would invest  28,460  in AIR PRODCHEMICALS on September 3, 2024 and sell it today you would earn a total of  3,170  from holding AIR PRODCHEMICALS or generate 11.14% return on investment over 90 days.

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

LIFEWAY FOODS  vs.  AIR PRODCHEMICALS

LIFEWAY FOODS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIFEWAY FOODS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, LIFEWAY FOODS unveiled solid returns over the last few months and may actually be approaching a breakup point.

AIR PRODCHEMICALS

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AIR PRODCHEMICALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIFEWAY FOODS and AIR PRODCHEMICALS

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

The idea behind LIFEWAY FOODS and AIR PRODCHEMICALS 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.