Correlation Between Trade Desk and Lifeway Foods

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

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

Diversification Opportunities for Trade Desk and Lifeway Foods

-0.45

Correlation Coefficient

Trade Desk  Lifeway Foods

Very good diversification

The 3 months correlation between Trade and Lifeway is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Trade Desk 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 The Trade Desk 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 Trade Desk i.e., Trade Desk and Lifeway Foods go up and down completely randomly.

Pair Corralation between Trade Desk and Lifeway Foods

Assuming the 90 days trading horizon The Trade Desk is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, The Trade Desk is 1.24 times less risky than Lifeway Foods. The stock trades about -0.17 of its potential returns per unit of risk. The Lifeway Foods is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,240  in Lifeway Foods on October 11, 2024 and sell it today you would lose (20.00) from holding Lifeway Foods or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

The Trade Desk  vs.  Lifeway Foods

Trade Desk

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trade Desk unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, Lifeway Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Trade Desk and Lifeway Foods

The main advantage of trading using opposite Trade Desk and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk 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 The Trade Desk 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 Commodity Directory module to find actively traded commodities issued by global exchanges.