Correlation Between Limoneira and Vital Farms

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

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

Diversification Opportunities for Limoneira and Vital Farms

0.66

Correlation Coefficient

Limoneira  Vital Farms

Poor diversification

The 3 months correlation between Limoneira and Vital is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Limoneira Co and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Limoneira 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 Limoneira Co 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 Limoneira i.e., Limoneira and Vital Farms go up and down completely randomly.

Pair Corralation between Limoneira and Vital Farms

Given the investment horizon of 90 days Limoneira Co is expected to under-perform the Vital Farms. But the stock apears to be less risky and, when comparing its historical volatility, Limoneira Co is 1.59 times less risky than Vital Farms. The stock trades about -0.2 of its potential returns per unit of risk. The Vital Farms is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,716  in Vital Farms on December 30, 2024 and sell it today you would lose (744.00) from holding Vital Farms or give up 20.02% of portfolio value over 90 days.

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

Limoneira Co  vs.  Vital Farms

Limoneira

Risk-Adjusted Performance

Very Weak

Over the last 90 days Limoneira Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 Limoneira and Vital Farms

The main advantage of trading using opposite Limoneira and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Limoneira 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 Limoneira Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.