Correlation Between Alico and Vital Farms

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

By analyzing existing cross correlation between Alico Inc and Vital Farms, you can compare the effects of market volatilities on Alico and Vital Farms 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 Alico with a short position of Vital Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alico and Vital Farms.

Diversification Opportunities for Alico and Vital Farms

-0.23

Correlation Coefficient

Alico  Vital Farms

Very good diversification

The 3 months correlation between Alico and Vital is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Alico 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 Alico Inc are associated (or correlated) with Vital Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Farms has no effect on the direction of Alico i.e., Alico and Vital Farms go up and down completely randomly.

Pair Corralation between Alico and Vital Farms

Given the investment horizon of 90 days Alico Inc is expected to under-perform the Vital Farms. But the stock apears to be less risky and, when comparing its historical volatility, Alico Inc is 1.38 times less risky than Vital Farms. The stock trades about -0.03 of its potential returns per unit of risk. The Vital Farms is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,015  in Vital Farms on August 31, 2024 and sell it today you would earn a total of  219.00  from holding Vital Farms or generate 7.26% return on investment over 90 days.

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

Alico Inc  vs.  Vital Farms

Alico Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alico Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Alico is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Vital Farms

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Vital Farms may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Alico and Vital Farms

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

The idea behind Alico Inc and Vital Farms 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.