Correlation Between Lifeway Foods and Sumitomo Rubber

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

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

Diversification Opportunities for Lifeway Foods and Sumitomo Rubber

-0.48

Correlation Coefficient

Lifeway Foods  Sumitomo Rubber

Very good diversification

The 3 months correlation between Lifeway and Sumitomo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu 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 Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between Lifeway Foods and Sumitomo Rubber

Assuming the 90 days horizon Lifeway Foods is expected to generate 1.34 times more return on investment than Sumitomo Rubber. However, Lifeway Foods is 1.34 times more volatile than Sumitomo Rubber Industries. It trades about 0.02 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about -0.07 per unit of risk. If you would invest  2,060  in Lifeway Foods on April 25, 2025 and sell it today you would earn a total of  20.00  from holding Lifeway Foods or generate 0.97% return on investment over 90 days.

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

Lifeway Foods  vs.  Sumitomo Rubber Industries

Lifeway Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lifeway Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sumitomo Rubber Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sumitomo Rubber Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lifeway Foods and Sumitomo Rubber

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

The idea behind Lifeway Foods and Sumitomo Rubber Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.