Correlation Between Lifeway Foods and Amazon

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

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

Diversification Opportunities for Lifeway Foods and Amazon

0.32

Correlation Coefficient

Lifeway Foods  Amazon

Weak diversification

The 3 months correlation between Lifeway and Amazon is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Lifeway Foods i.e., Lifeway Foods and Amazon go up and down completely randomly.

Pair Corralation between Lifeway Foods and Amazon

Assuming the 90 days horizon Lifeway Foods is expected to generate 4.03 times less return on investment than Amazon. In addition to that, Lifeway Foods is 1.04 times more volatile than Amazon Inc. It trades about 0.04 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.17 per unit of volatility. If you would invest  16,048  in Amazon Inc on April 23, 2025 and sell it today you would earn a total of  3,402  from holding Amazon Inc or generate 21.2% return on investment over 90 days.

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

Lifeway Foods  vs.  Amazon 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Amazon Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifeway Foods and Amazon

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

The idea behind Lifeway Foods and Amazon 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.