Correlation Between FIREWEED METALS and LIFEWAY FOODS

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

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

Diversification Opportunities for FIREWEED METALS and LIFEWAY FOODS

0.67

Correlation Coefficient

FIREWEED METALS  LIFEWAY FOODS

Poor diversification

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

Pair Corralation between FIREWEED METALS and LIFEWAY FOODS

Assuming the 90 days horizon FIREWEED METALS is expected to generate 1.99 times less return on investment than LIFEWAY FOODS. But when comparing it to its historical volatility, FIREWEED METALS P is 1.06 times less risky than LIFEWAY FOODS. It trades about 0.06 of its potential returns per unit of risk. LIFEWAY FOODS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,910  in LIFEWAY FOODS on September 13, 2024 and sell it today you would earn a total of  370.00  from holding LIFEWAY FOODS or generate 19.37% return on investment over 90 days.

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

FIREWEED METALS P  vs.  LIFEWAY FOODS

FIREWEED METALS P

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 4 (%) 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.

LIFEWAY FOODS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIFEWAY FOODS are ranked lower than 8 (%) 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.

Pair Trading with FIREWEED METALS and LIFEWAY FOODS

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

The idea behind FIREWEED METALS P and LIFEWAY FOODS 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.