Correlation Between Tootsie Roll and Vital Farms

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

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

Diversification Opportunities for Tootsie Roll and Vital Farms

-0.35

Correlation Coefficient

Tootsie Roll  Vital Farms

Very good diversification

The 3 months correlation between Tootsie and Vital is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tootsie Roll Industries and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Tootsie Roll 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 Tootsie Roll Industries 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 Tootsie Roll i.e., Tootsie Roll and Vital Farms go up and down completely randomly.

Pair Corralation between Tootsie Roll and Vital Farms

Allowing for the 90-day total investment horizon Tootsie Roll Industries is expected to under-perform the Vital Farms. But the stock apears to be less risky and, when comparing its historical volatility, Tootsie Roll Industries is 2.25 times less risky than Vital Farms. The stock trades about -0.04 of its potential returns per unit of risk. The Vital Farms is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,767  in Vital Farms on October 24, 2024 and sell it today you would earn a total of  2,672  from holding Vital Farms or generate 151.22% return on investment over 90 days.

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

Tootsie Roll Industries  vs.  Vital Farms

Tootsie Roll Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tootsie Roll Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tootsie Roll is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Vital Farms

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 11 (%) 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 Tootsie Roll and Vital Farms

The main advantage of trading using opposite Tootsie Roll and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tootsie Roll 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 Tootsie Roll Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.