Correlation Between LIFEWAY FOODS and FIREWEED METALS

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

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

Diversification Opportunities for LIFEWAY FOODS and FIREWEED METALS

0.67

Correlation Coefficient

LIFEWAY FOODS  FIREWEED METALS

Poor diversification

The 3 months correlation between LIFEWAY and FIREWEED is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding LIFEWAY FOODS and FIREWEED METALS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIREWEED METALS P 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 FIREWEED METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIREWEED METALS P has no effect on the direction of LIFEWAY FOODS i.e., LIFEWAY FOODS and FIREWEED METALS go up and down completely randomly.

Pair Corralation between LIFEWAY FOODS and FIREWEED METALS

Assuming the 90 days trading horizon LIFEWAY FOODS is expected to generate 1.08 times more return on investment than FIREWEED METALS. However, LIFEWAY FOODS is 1.08 times more volatile than FIREWEED METALS P. It trades about 0.12 of its potential returns per unit of risk. FIREWEED METALS P is currently generating about 0.04 per unit of risk. If you would invest  1,830  in LIFEWAY FOODS on September 12, 2024 and sell it today you would earn a total of  430.00  from holding LIFEWAY FOODS or generate 23.5% 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.  FIREWEED METALS P

LIFEWAY FOODS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIFEWAY FOODS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LIFEWAY FOODS unveiled solid returns over the last few months and may actually be approaching a breakup point.

FIREWEED METALS P

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FIREWEED METALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LIFEWAY FOODS and FIREWEED METALS

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

The idea behind LIFEWAY FOODS and FIREWEED METALS P 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.