Correlation Between Real Good and Lifeway Foods

Can any of the company-specific risk be diversified away by investing in both Real Good 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 Real Good and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Real Good Food and Lifeway Foods, you can compare the effects of market volatilities on Real Good 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 Real Good with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Good and Lifeway Foods.

Diversification Opportunities for Real Good and Lifeway Foods

-0.15

Correlation Coefficient

Real Good  Lifeway Foods

Good diversification

The 3 months correlation between Real and Lifeway is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Real Good Food and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Real Good 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 Real Good Food 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 Real Good i.e., Real Good and Lifeway Foods go up and down completely randomly.

Pair Corralation between Real Good and Lifeway Foods

Considering the 90-day investment horizon Real Good Food is expected to under-perform the Lifeway Foods. In addition to that, Real Good is 1.83 times more volatile than Lifeway Foods. It trades about -0.1 of its total potential returns per unit of risk. Lifeway Foods is currently generating about 0.06 per unit of volatility. If you would invest  2,182  in Lifeway Foods on September 13, 2024 and sell it today you would earn a total of  258.00  from holding Lifeway Foods or generate 11.82% return on investment over 90 days.

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

Real Good Food  vs.  Lifeway Foods

Real Good Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Good Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lifeway Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lifeway Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Real Good and Lifeway Foods

The main advantage of trading using opposite Real Good and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Good 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 Real Good Food 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.