Correlation Between LIFEWAY FOODS and Carmat SA

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

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

Diversification Opportunities for LIFEWAY FOODS and Carmat SA

0.65

Correlation Coefficient

LIFEWAY FOODS  Carmat SA

Poor diversification

The 3 months correlation between LIFEWAY and Carmat is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LIFEWAY FOODS and Carmat SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmat SA 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 Carmat SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmat SA has no effect on the direction of LIFEWAY FOODS i.e., LIFEWAY FOODS and Carmat SA go up and down completely randomly.

Pair Corralation between LIFEWAY FOODS and Carmat SA

Assuming the 90 days trading horizon LIFEWAY FOODS is expected to generate 0.64 times more return on investment than Carmat SA. However, LIFEWAY FOODS is 1.57 times less risky than Carmat SA. It trades about -0.05 of its potential returns per unit of risk. Carmat SA is currently generating about -0.09 per unit of risk. If you would invest  2,400  in LIFEWAY FOODS on October 24, 2024 and sell it today you would lose (240.00) from holding LIFEWAY FOODS or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

LIFEWAY FOODS  vs.  Carmat SA

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 fragile 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.

Carmat SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat SA 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LIFEWAY FOODS and Carmat SA

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

The idea behind LIFEWAY FOODS and Carmat SA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.