Correlation Between LIFEWAY FOODS and ALEFARM BREWING

Can any of the company-specific risk be diversified away by investing in both LIFEWAY FOODS and ALEFARM BREWING 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 ALEFARM BREWING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LIFEWAY FOODS and ALEFARM BREWING DK 05, you can compare the effects of market volatilities on LIFEWAY FOODS and ALEFARM BREWING 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 ALEFARM BREWING. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFEWAY FOODS and ALEFARM BREWING.

Diversification Opportunities for LIFEWAY FOODS and ALEFARM BREWING

0.51

Correlation Coefficient

LIFEWAY FOODS  ALEFARM BREWING

Very weak diversification

The 3 months correlation between LIFEWAY and ALEFARM is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding LIFEWAY FOODS and ALEFARM BREWING DK 05 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALEFARM BREWING DK 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 ALEFARM BREWING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALEFARM BREWING DK has no effect on the direction of LIFEWAY FOODS i.e., LIFEWAY FOODS and ALEFARM BREWING go up and down completely randomly.

Pair Corralation between LIFEWAY FOODS and ALEFARM BREWING

Assuming the 90 days trading horizon LIFEWAY FOODS is expected to generate 1.41 times more return on investment than ALEFARM BREWING. However, LIFEWAY FOODS is 1.41 times more volatile than ALEFARM BREWING DK 05. It trades about 0.06 of its potential returns per unit of risk. ALEFARM BREWING DK 05 is currently generating about 0.02 per unit of risk. If you would invest  1,260  in LIFEWAY FOODS on October 1, 2024 and sell it today you would earn a total of  880.00  from holding LIFEWAY FOODS or generate 69.84% 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.  ALEFARM BREWING DK 05

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 comparatively stable basic indicators, LIFEWAY FOODS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ALEFARM BREWING DK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALEFARM BREWING DK 05 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with LIFEWAY FOODS and ALEFARM BREWING

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

The idea behind LIFEWAY FOODS and ALEFARM BREWING DK 05 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.