Correlation Between Vital Farms and Limoneira

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

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

Diversification Opportunities for Vital Farms and Limoneira

0.35

Correlation Coefficient

Vital Farms  Limoneira

Weak diversification

The 3 months correlation between Vital and Limoneira is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Limoneira Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limoneira 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 Limoneira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limoneira has no effect on the direction of Vital Farms i.e., Vital Farms and Limoneira go up and down completely randomly.

Pair Corralation between Vital Farms and Limoneira

Given the investment horizon of 90 days Vital Farms is expected to generate 1.2 times less return on investment than Limoneira. In addition to that, Vital Farms is 1.57 times more volatile than Limoneira Co. It trades about 0.06 of its total potential returns per unit of risk. Limoneira Co is currently generating about 0.12 per unit of volatility. If you would invest  2,411  in Limoneira Co on September 3, 2024 and sell it today you would earn a total of  369.00  from holding Limoneira Co or generate 15.3% return on investment over 90 days.

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

Vital Farms  vs.  Limoneira Co

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.

Limoneira

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Limoneira Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Limoneira reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vital Farms and Limoneira

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

The idea behind Vital Farms and Limoneira Co 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 CEOs Directory module to screen CEOs from public companies around the world.