Correlation Between Dole PLC and Lifeway Foods

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

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

Diversification Opportunities for Dole PLC and Lifeway Foods

0.5

Correlation Coefficient

Dole PLC  Lifeway Foods

Very weak diversification

The 3 months correlation between Dole and Lifeway is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dole PLC and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Dole PLC 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 Dole PLC 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 Dole PLC i.e., Dole PLC and Lifeway Foods go up and down completely randomly.

Pair Corralation between Dole PLC and Lifeway Foods

Given the investment horizon of 90 days Dole PLC is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, Dole PLC is 7.0 times less risky than Lifeway Foods. The stock trades about -0.03 of its potential returns per unit of risk. The Lifeway Foods is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  1,089  in Lifeway Foods on January 19, 2024 and sell it today you would earn a total of  910.00  from holding Lifeway Foods or generate 83.56% return on investment over 90 days.

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

Dole PLC  vs.  Lifeway Foods

Dole PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dole PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Dole PLC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Dole PLC and Lifeway Foods

The main advantage of trading using opposite Dole PLC and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dole PLC 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 Dole PLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.