Correlation Between Nisshin Seifun and Lifeway Foods

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Can any of the company-specific risk be diversified away by investing in both Nisshin Seifun 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 Nisshin Seifun and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nisshin Seifun Group and Lifeway Foods, you can compare the effects of market volatilities on Nisshin Seifun 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 Nisshin Seifun with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nisshin Seifun and Lifeway Foods.

Diversification Opportunities for Nisshin Seifun and Lifeway Foods

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Nisshin and Lifeway is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Nisshin Seifun Group and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Nisshin Seifun 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 Nisshin Seifun Group 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 Nisshin Seifun i.e., Nisshin Seifun and Lifeway Foods go up and down completely randomly.

Pair Corralation between Nisshin Seifun and Lifeway Foods

Assuming the 90 days horizon Nisshin Seifun Group is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, Nisshin Seifun Group is 3.6 times less risky than Lifeway Foods. The stock trades about -0.03 of its potential returns per unit of risk. The Lifeway Foods is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,150  in Lifeway Foods on October 2, 2024 and sell it today you would earn a total of  1,070  from holding Lifeway Foods or generate 93.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Nisshin Seifun Group  vs.  Lifeway Foods

 Performance 
       Timeline  
Nisshin Seifun Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nisshin Seifun Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nisshin Seifun is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Lifeway Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lifeway Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lifeway Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nisshin Seifun and Lifeway Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nisshin Seifun and Lifeway Foods

The main advantage of trading using opposite Nisshin Seifun and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nisshin Seifun 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' long position.
The idea behind Nisshin Seifun Group 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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