Correlation Between Natures Sunshine and Lifeway Foods

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

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

Diversification Opportunities for Natures Sunshine and Lifeway Foods

-0.13

Correlation Coefficient

Natures Sunshine  Lifeway Foods

Good diversification

The 3 months correlation between Natures and Lifeway is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Natures Sunshine Products and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Natures Sunshine 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 Natures Sunshine Products 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 Natures Sunshine i.e., Natures Sunshine and Lifeway Foods go up and down completely randomly.

Pair Corralation between Natures Sunshine and Lifeway Foods

Given the investment horizon of 90 days Natures Sunshine is expected to generate 5.01 times less return on investment than Lifeway Foods. But when comparing it to its historical volatility, Natures Sunshine Products is 2.5 times less risky than Lifeway Foods. It trades about 0.1 of its potential returns per unit of risk. Lifeway Foods is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,121  in Lifeway Foods on August 10, 2024 and sell it today you would earn a total of  1,379  from holding Lifeway Foods or generate 123.02% return on investment over 90 days.

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

Natures Sunshine Products  vs.  Lifeway Foods

Natures Sunshine Products

Risk-Adjusted Performance

8 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Natures Sunshine Products are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Natures Sunshine reported solid returns over the last few months and may actually be approaching a breakup point.

Lifeway Foods

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 16 (%) 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 Natures Sunshine and Lifeway Foods

The main advantage of trading using opposite Natures Sunshine and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natures Sunshine 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 Natures Sunshine Products 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.