Correlation Between China Clean and Vital Farms

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

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

Diversification Opportunities for China Clean and Vital Farms

0.0

Correlation Coefficient

China Clean  Vital Farms

Pay attention - limited upside

The 3 months correlation between China and Vital is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Clean Energy and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and China Clean 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 China Clean Energy 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 China Clean i.e., China Clean and Vital Farms go up and down completely randomly.

Pair Corralation between China Clean and Vital Farms

If you would invest  3,537  in Vital Farms on October 25, 2024 and sell it today you would earn a total of  955.50  from holding Vital Farms or generate 27.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

China Clean Energy  vs.  Vital Farms

China Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, China Clean is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vital Farms

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 10 (%) 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.

Pair Trading with China Clean and Vital Farms

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

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.