Correlation Between Vital Farms and Adecoagro

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

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

Diversification Opportunities for Vital Farms and Adecoagro

0.03

Correlation Coefficient

Vital Farms  Adecoagro

Significant diversification

The 3 months correlation between Vital and Adecoagro is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Adecoagro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecoagro SA and Vital 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 Vital Farms are associated (or correlated) with Adecoagro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecoagro SA has no effect on the direction of Vital Farms i.e., Vital Farms and Adecoagro go up and down completely randomly.

Pair Corralation between Vital Farms and Adecoagro

Given the investment horizon of 90 days Vital Farms is expected to generate 2.1 times more return on investment than Adecoagro. However, Vital Farms is 2.1 times more volatile than Adecoagro SA. It trades about -0.03 of its potential returns per unit of risk. Adecoagro SA is currently generating about -0.08 per unit of risk. If you would invest  3,468  in Vital Farms on September 1, 2024 and sell it today you would lose (148.00) from holding Vital Farms or give up 4.27% of portfolio value over 90 days.

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

Vital Farms  vs.  Adecoagro SA

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 weak basic indicators, Vital Farms disclosed solid returns over the last few months and may actually be approaching a breakup point.

Adecoagro SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vital Farms and Adecoagro

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

The idea behind Vital Farms and Adecoagro SA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.