Correlation Between Lifeway Foods and Dow

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

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

Diversification Opportunities for Lifeway Foods and Dow

0.13

Correlation Coefficient

Lifeway Foods  Dow

Average diversification

The 3 months correlation between Lifeway and Dow is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Dow go up and down completely randomly.

Pair Corralation between Lifeway Foods and Dow

Assuming the 90 days horizon Lifeway Foods is expected to generate 0.72 times more return on investment than Dow. However, Lifeway Foods is 1.39 times less risky than Dow. It trades about 0.05 of its potential returns per unit of risk. Dow Inc is currently generating about 0.0 per unit of risk. If you would invest  2,040  in Lifeway Foods on April 24, 2025 and sell it today you would earn a total of  100.00  from holding Lifeway Foods or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Lifeway Foods  vs.  Dow Inc

Lifeway Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 3 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dow Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dow Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dow is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lifeway Foods and Dow

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

The idea behind Lifeway Foods and Dow Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.