Correlation Between MKDWELL Tech and Vital Farms

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

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

Diversification Opportunities for MKDWELL Tech and Vital Farms

0.16

Correlation Coefficient

MKDWELL Tech  Vital Farms

Average diversification

The 3 months correlation between MKDWELL and Vital is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MKDWELL Tech Warrants and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and MKDWELL Tech 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 MKDWELL Tech Warrants 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 MKDWELL Tech i.e., MKDWELL Tech and Vital Farms go up and down completely randomly.

Pair Corralation between MKDWELL Tech and Vital Farms

Assuming the 90 days horizon MKDWELL Tech Warrants is expected to generate 9.92 times more return on investment than Vital Farms. However, MKDWELL Tech is 9.92 times more volatile than Vital Farms. It trades about 0.11 of its potential returns per unit of risk. Vital Farms is currently generating about 0.07 per unit of risk. If you would invest  6.00  in MKDWELL Tech Warrants on October 10, 2024 and sell it today you would lose (4.21) from holding MKDWELL Tech Warrants or give up 70.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	42.83%
Values	Daily Returns

MKDWELL Tech Warrants  vs.  Vital Farms

MKDWELL Tech Warrants

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MKDWELL Tech Warrants are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MKDWELL Tech showed solid returns over the last few months and may actually be approaching a breakup point.

Vital Farms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vital Farms has generated negative risk-adjusted returns adding no value to investors with long positions. 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 MKDWELL Tech and Vital Farms

The main advantage of trading using opposite MKDWELL Tech and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MKDWELL Tech 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 MKDWELL Tech Warrants 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..