Correlation Between Lifeway Foods and Coca Cola

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

Diversification Opportunities for Lifeway Foods and Coca Cola

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Lifeway and Coca is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola FEMSA has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Coca Cola go up and down completely randomly.

Pair Corralation between Lifeway Foods and Coca Cola

Assuming the 90 days horizon Lifeway Foods is expected to generate 1.59 times more return on investment than Coca Cola. However, Lifeway Foods is 1.59 times more volatile than Coca Cola FEMSA SAB. It trades about 0.13 of its potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.01 per unit of risk. If you would invest  1,740  in Lifeway Foods on September 3, 2024 and sell it today you would earn a total of  600.00  from holding Lifeway Foods or generate 34.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Lifeway Foods  vs.  Coca Cola FEMSA SAB

 Performance 
       Timeline  
Lifeway Foods 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 9 (%) 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.
Coca Cola FEMSA 

Risk-Adjusted Performance

0 of 100

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

Lifeway Foods and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lifeway Foods and Coca Cola

The main advantage of trading using opposite Lifeway Foods and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.
The idea behind Lifeway Foods and Coca Cola FEMSA SAB 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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