Correlation Between LIFEWAY FOODS and Nippon Steel

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

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

Diversification Opportunities for LIFEWAY FOODS and Nippon Steel

-0.25

Correlation Coefficient

LIFEWAY FOODS  Nippon Steel

Very good diversification

The 3 months correlation between LIFEWAY and Nippon is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding LIFEWAY FOODS and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of LIFEWAY FOODS i.e., LIFEWAY FOODS and Nippon Steel go up and down completely randomly.

Pair Corralation between LIFEWAY FOODS and Nippon Steel

Assuming the 90 days trading horizon LIFEWAY FOODS is expected to generate 2.42 times more return on investment than Nippon Steel. However, LIFEWAY FOODS is 2.42 times more volatile than Nippon Steel. It trades about 0.08 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.01 per unit of risk. If you would invest  482.00  in LIFEWAY FOODS on October 23, 2024 and sell it today you would earn a total of  1,578  from holding LIFEWAY FOODS or generate 327.39% return on investment over 90 days.

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

LIFEWAY FOODS  vs.  Nippon Steel

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nippon Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nippon Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIFEWAY FOODS and Nippon Steel

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

The idea behind LIFEWAY FOODS and Nippon Steel 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.