Correlation Between Better Choice and Village Farms

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

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

Diversification Opportunities for Better Choice and Village Farms

0.28

Correlation Coefficient

Better Choice  Village Farms

Modest diversification

The 3 months correlation between Better and Village is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Better Choice and Village Farms International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Farms Intern and Better Choice 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 Better Choice are associated (or correlated) with Village Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Farms Intern has no effect on the direction of Better Choice i.e., Better Choice and Village Farms go up and down completely randomly.

Pair Corralation between Better Choice and Village Farms

Given the investment horizon of 90 days Better Choice is expected to generate 1.63 times more return on investment than Village Farms. However, Better Choice is 1.63 times more volatile than Village Farms International. It trades about -0.01 of its potential returns per unit of risk. Village Farms International is currently generating about -0.08 per unit of risk. If you would invest  249.00  in Better Choice on September 18, 2024 and sell it today you would lose (33.00) from holding Better Choice or give up 13.25% of portfolio value over 90 days.

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

Better Choice  vs.  Village Farms International

Better Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Better Choice is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Village Farms Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Farms International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Better Choice and Village Farms

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

The idea behind Better Choice and Village Farms International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.