Correlation Between Lifeway Foods and Origin Agritech

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

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

Diversification Opportunities for Lifeway Foods and Origin Agritech

0.42

Correlation Coefficient

Lifeway Foods  Origin Agritech

Very weak diversification

The 3 months correlation between Lifeway and Origin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Lifeway Foods 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 Lifeway Foods are associated (or correlated) with Origin Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Agritech has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Origin Agritech go up and down completely randomly.

Pair Corralation between Lifeway Foods and Origin Agritech

Assuming the 90 days horizon Lifeway Foods is expected to generate 2.91 times less return on investment than Origin Agritech. But when comparing it to its historical volatility, Lifeway Foods is 2.09 times less risky than Origin Agritech. It trades about 0.03 of its potential returns per unit of risk. Origin Agritech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  214.00  in Origin Agritech on September 20, 2024 and sell it today you would earn a total of  4.00  from holding Origin Agritech or generate 1.87% return on investment over 90 days.

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

Lifeway Foods  vs.  Origin Agritech

Lifeway Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lifeway Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Origin Agritech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lifeway Foods and Origin Agritech

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

The idea behind Lifeway Foods and Origin Agritech 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.