Correlation Between Simply Good and Lifeway Foods

Can any of the company-specific risk be diversified away by investing in both Simply 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 Simply 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 Simply Good Foods and Lifeway Foods, you can compare the effects of market volatilities on Simply 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 Simply Good with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simply Good and Lifeway Foods.

Diversification Opportunities for Simply Good and Lifeway Foods

-0.39

Correlation Coefficient

Simply Good  Lifeway Foods

Very good diversification

The 3 months correlation between Simply and Lifeway is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Simply Good Foods and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Simply 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 Simply Good Foods 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 Simply Good i.e., Simply Good and Lifeway Foods go up and down completely randomly.

Pair Corralation between Simply Good and Lifeway Foods

Given the investment horizon of 90 days Simply Good Foods is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, Simply Good Foods is 3.53 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 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,262  in Lifeway Foods on October 23, 2024 and sell it today you would earn a total of  983.00  from holding Lifeway Foods or generate 77.89% return on investment over 90 days.

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

Simply Good Foods  vs.  Lifeway Foods

Simply Good Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Good Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Simply Good is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Simply Good and Lifeway Foods

The main advantage of trading using opposite Simply Good and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simply 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 Simply Good Foods 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.