Correlation Between Village Farms and AppHarvest

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

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

Diversification Opportunities for Village Farms and AppHarvest

0.67

Correlation Coefficient

Village Farms  AppHarvest

Poor diversification

The 3 months correlation between Village and AppHarvest is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Village Farms International and AppHarvest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AppHarvest and Village Farms 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 Village Farms International are associated (or correlated) with AppHarvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AppHarvest has no effect on the direction of Village Farms i.e., Village Farms and AppHarvest go up and down completely randomly.

Pair Corralation between Village Farms and AppHarvest

If you would invest  0.90  in AppHarvest on September 18, 2024 and sell it today you would earn a total of  0.00  from holding AppHarvest or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.6%
Values	Daily Returns

Village Farms International  vs.  AppHarvest

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.

AppHarvest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AppHarvest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical indicators, AppHarvest is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Village Farms and AppHarvest

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

The idea behind Village Farms International and AppHarvest 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.