Correlation Between American Healthcare and Vital Farms

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

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

Diversification Opportunities for American Healthcare and Vital Farms

-0.38

Correlation Coefficient

American Healthcare  Vital Farms

Very good diversification

The 3 months correlation between American and Vital is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Healthcare REIT, and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and American Healthcare 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 American Healthcare REIT, 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 American Healthcare i.e., American Healthcare and Vital Farms go up and down completely randomly.

Pair Corralation between American Healthcare and Vital Farms

Considering the 90-day investment horizon American Healthcare REIT, is expected to generate 0.53 times more return on investment than Vital Farms. However, American Healthcare REIT, is 1.89 times less risky than Vital Farms. It trades about 0.09 of its potential returns per unit of risk. Vital Farms is currently generating about -0.12 per unit of risk. If you would invest  2,751  in American Healthcare REIT, on December 20, 2024 and sell it today you would earn a total of  263.00  from holding American Healthcare REIT, or generate 9.56% return on investment over 90 days.

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

American Healthcare REIT,  vs.  Vital Farms

American Healthcare REIT,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, American Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vital Farms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vital Farms 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 basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with American Healthcare and Vital Farms

The main advantage of trading using opposite American Healthcare and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Healthcare 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 American Healthcare REIT, 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.