Correlation Between Village Farms and NaturalShrimp

Can any of the company-specific risk be diversified away by investing in both Village Farms and NaturalShrimp 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 NaturalShrimp 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 NaturalShrimp, you can compare the effects of market volatilities on Village Farms and NaturalShrimp 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 NaturalShrimp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Village Farms and NaturalShrimp.

Diversification Opportunities for Village Farms and NaturalShrimp

0.07

Correlation Coefficient

Village Farms  NaturalShrimp

Significant diversification

The 3 months correlation between Village and NaturalShrimp is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Village Farms International and NaturalShrimp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NaturalShrimp 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 NaturalShrimp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NaturalShrimp has no effect on the direction of Village Farms i.e., Village Farms and NaturalShrimp go up and down completely randomly.

Pair Corralation between Village Farms and NaturalShrimp

Considering the 90-day investment horizon Village Farms International is expected to under-perform the NaturalShrimp. But the stock apears to be less risky and, when comparing its historical volatility, Village Farms International is 3.64 times less risky than NaturalShrimp. The stock trades about -0.04 of its potential returns per unit of risk. The NaturalShrimp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.38  in NaturalShrimp on September 12, 2024 and sell it today you would lose (0.01) from holding NaturalShrimp or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Village Farms International  vs.  NaturalShrimp

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NaturalShrimp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NaturalShrimp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, NaturalShrimp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Village Farms and NaturalShrimp

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

The idea behind Village Farms International and NaturalShrimp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..