Correlation Between Lifeway Foods and INFORMATION SVC

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

By analyzing existing cross correlation between Lifeway Foods and INFORMATION SVC GRP, you can compare the effects of market volatilities on Lifeway Foods and INFORMATION SVC 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 INFORMATION SVC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and INFORMATION SVC.

Diversification Opportunities for Lifeway Foods and INFORMATION SVC

-0.3

Correlation Coefficient

Lifeway Foods  INFORMATION SVC

Very good diversification

The 3 months correlation between Lifeway and INFORMATION is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and INFORMATION SVC go up and down completely randomly.

Pair Corralation between Lifeway Foods and INFORMATION SVC

Assuming the 90 days horizon Lifeway Foods is expected to under-perform the INFORMATION SVC. In addition to that, Lifeway Foods is 1.16 times more volatile than INFORMATION SVC GRP. It trades about -0.12 of its total potential returns per unit of risk. INFORMATION SVC GRP is currently generating about -0.08 per unit of volatility. If you would invest  334.00  in INFORMATION SVC GRP on September 26, 2024 and sell it today you would lose (10.00) from holding INFORMATION SVC GRP or give up 2.99% of portfolio value over 90 days.

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

Lifeway Foods  vs.  INFORMATION SVC GRP

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

INFORMATION SVC GRP

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, INFORMATION SVC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and INFORMATION SVC

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

The idea behind Lifeway Foods and INFORMATION SVC GRP 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.