Correlation Between Fresh Del and Vital Farms

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

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

Diversification Opportunities for Fresh Del and Vital Farms

-0.46

Correlation Coefficient

Fresh Del  Vital Farms

Very good diversification

The 3 months correlation between Fresh and Vital is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Fresh Del 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 Fresh Del Monte 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 Fresh Del i.e., Fresh Del and Vital Farms go up and down completely randomly.

Pair Corralation between Fresh Del and Vital Farms

Considering the 90-day investment horizon Fresh Del Monte is expected to generate 0.55 times more return on investment than Vital Farms. However, Fresh Del Monte is 1.81 times less risky than Vital Farms. It trades about 0.15 of its potential returns per unit of risk. Vital Farms is currently generating about 0.03 per unit of risk. If you would invest  2,902  in Fresh Del Monte on August 30, 2024 and sell it today you would earn a total of  495.00  from holding Fresh Del Monte or generate 17.06% return on investment over 90 days.

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

Fresh Del Monte  vs.  Vital Farms

Fresh Del Monte

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Fresh Del reported solid returns over the last few months and may actually be approaching a breakup point.

Vital Farms

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Vital Farms is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Fresh Del and Vital Farms

The main advantage of trading using opposite Fresh Del and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del 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 Fresh Del Monte 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.