Correlation Between Lifeway Foods and Microsoft
Can any of the company-specific risk be diversified away by investing in both Lifeway Foods and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifeway Foods and Microsoft, you can compare the effects of market volatilities on Lifeway Foods and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifeway Foods and Microsoft.
Diversification Opportunities for Lifeway Foods and Microsoft
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lifeway and Microsoft is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Microsoft go up and down completely randomly.
Pair Corralation between Lifeway Foods and Microsoft
Assuming the 90 days horizon Lifeway Foods is expected to generate 3.29 times more return on investment than Microsoft. However, Lifeway Foods is 3.29 times more volatile than Microsoft. It trades about 0.08 of its potential returns per unit of risk. Microsoft is currently generating about 0.09 per unit of risk. If you would invest 520.00 in Lifeway Foods on September 24, 2024 and sell it today you would earn a total of 1,680 from holding Lifeway Foods or generate 323.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Lifeway Foods vs. Microsoft
Performance |
Timeline |
Lifeway Foods |
Microsoft |
Lifeway Foods and Microsoft Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lifeway Foods and Microsoft
The main advantage of trading using opposite Lifeway Foods and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.Lifeway Foods vs. Mowi ASA | Lifeway Foods vs. LEROY SEAFOOD GRUNSPADR | Lifeway Foods vs. Lery Seafood Group | Lifeway Foods vs. Nisshin Seifun Group |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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