Correlation Between Lancaster Colony and Vital Farms

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

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

Diversification Opportunities for Lancaster Colony and Vital Farms

-0.23

Correlation Coefficient

Lancaster Colony  Vital Farms

Very good diversification

The 3 months correlation between Lancaster and Vital is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Lancaster Colony 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 Lancaster Colony 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 Lancaster Colony i.e., Lancaster Colony and Vital Farms go up and down completely randomly.

Pair Corralation between Lancaster Colony and Vital Farms

Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the Vital Farms. But the stock apears to be less risky and, when comparing its historical volatility, Lancaster Colony is 1.64 times less risky than Vital Farms. The stock trades about 0.0 of its potential returns per unit of risk. The Vital Farms is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,615  in Vital Farms on September 26, 2024 and sell it today you would earn a total of  318.00  from holding Vital Farms or generate 8.8% return on investment over 90 days.

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

Lancaster Colony  vs.  Vital Farms

Lancaster Colony

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancaster Colony has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vital Farms

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Vital Farms disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Vital Farms

The main advantage of trading using opposite Lancaster Colony and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony 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 Lancaster Colony 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.