Correlation Between IShares MSCI and Lifeway Foods

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

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

Diversification Opportunities for IShares MSCI and Lifeway Foods

0.41

Correlation Coefficient

IShares MSCI  Lifeway Foods

Very weak diversification

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

Pair Corralation between IShares MSCI and Lifeway Foods

Given the investment horizon of 90 days iShares MSCI Ireland is expected to under-perform the Lifeway Foods. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Ireland is 4.35 times less risky than Lifeway Foods. The etf trades about -0.09 of its potential returns per unit of risk. The Lifeway Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,916  in Lifeway Foods on January 26, 2024 and sell it today you would earn a total of  227.00  from holding Lifeway Foods or generate 11.85% return on investment over 90 days.

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

iShares MSCI Ireland  vs.  Lifeway Foods

iShares MSCI Ireland

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Ireland are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Lifeway Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lifeway Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Lifeway Foods

The main advantage of trading using opposite IShares MSCI and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI Ireland 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.