Correlation Between Lifeway Foods and Escalon Medical

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

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

Diversification Opportunities for Lifeway Foods and Escalon Medical

-0.72

Correlation Coefficient

Lifeway Foods  Escalon Medical

Pay attention - limited upside

The 3 months correlation between Lifeway and Escalon is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Escalon Medical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalon Medical Corp 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 Escalon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalon Medical Corp has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Escalon Medical go up and down completely randomly.

Pair Corralation between Lifeway Foods and Escalon Medical

Given the investment horizon of 90 days Lifeway Foods is expected to generate 0.66 times more return on investment than Escalon Medical. However, Lifeway Foods is 1.51 times less risky than Escalon Medical. It trades about 0.08 of its potential returns per unit of risk. Escalon Medical Corp is currently generating about -0.01 per unit of risk. If you would invest  512.00  in Lifeway Foods on January 31, 2024 and sell it today you would earn a total of  1,489  from holding Lifeway Foods or generate 290.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	38.06%
Values	Daily Returns

Lifeway Foods  vs.  Escalon Medical Corp

Lifeway Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Lifeway Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Escalon Medical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalon Medical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Escalon Medical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lifeway Foods and Escalon Medical

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

The idea behind Lifeway Foods and Escalon Medical Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.