Correlation Between National Bank and LIFEWAY FOODS

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

By analyzing existing cross correlation between National Bank Holdings and LIFEWAY FOODS, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of LIFEWAY FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and LIFEWAY FOODS.

Diversification Opportunities for National Bank and LIFEWAY FOODS

-0.43

Correlation Coefficient

National Bank  LIFEWAY FOODS

Very good diversification

The 3 months correlation between National and LIFEWAY is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and LIFEWAY FOODS go up and down completely randomly.

Pair Corralation between National Bank and LIFEWAY FOODS

Assuming the 90 days horizon National Bank Holdings is expected to under-perform the LIFEWAY FOODS. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.61 times less risky than LIFEWAY FOODS. The stock trades about -0.33 of its potential returns per unit of risk. The LIFEWAY FOODS is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,240  in LIFEWAY FOODS on October 1, 2024 and sell it today you would lose (100.00) from holding LIFEWAY FOODS or give up 4.46% of portfolio value over 90 days.

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

National Bank Holdings  vs.  LIFEWAY FOODS

National Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank reported 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. 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.

Pair Trading with National Bank and LIFEWAY FOODS

The main advantage of trading using opposite National Bank and LIFEWAY FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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's long position.

The idea behind National Bank Holdings 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.