Correlation Between Better Choice and Lifeway Foods

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

By analyzing existing cross correlation between Better Choice and Lifeway Foods, you can compare the effects of market volatilities on Better Choice 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 Better Choice with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better Choice and Lifeway Foods.

Diversification Opportunities for Better Choice and Lifeway Foods

-0.41

Correlation Coefficient

Better Choice  Lifeway Foods

Very good diversification

The 3 months correlation between Better and Lifeway is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Better Choice and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Better Choice 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 Better Choice 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 Better Choice i.e., Better Choice and Lifeway Foods go up and down completely randomly.

Pair Corralation between Better Choice and Lifeway Foods

Given the investment horizon of 90 days Better Choice is expected to under-perform the Lifeway Foods. In addition to that, Better Choice is 1.85 times more volatile than Lifeway Foods. It trades about -0.02 of its total potential returns per unit of risk. Lifeway Foods is currently generating about 0.08 per unit of volatility. If you would invest  572.00  in Lifeway Foods on January 19, 2024 and sell it today you would earn a total of  1,427  from holding Lifeway Foods or generate 249.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Better Choice  vs.  Lifeway Foods

Better Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Lifeway Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Lifeway Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Better Choice and Lifeway Foods

The main advantage of trading using opposite Better Choice and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better Choice 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' long position.

The idea behind Better Choice 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.