Correlation Between Freeport and Vital Farms

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

By analyzing existing cross correlation between Freeport McMoRan 425 percent and Vital Farms, you can compare the effects of market volatilities on Freeport 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 Freeport with a short position of Vital Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Vital Farms.

Diversification Opportunities for Freeport and Vital Farms

-0.16

Correlation Coefficient

Freeport  Vital Farms

Good diversification

The 3 months correlation between Freeport and Vital is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 425 percent and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Freeport 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 Freeport McMoRan 425 percent 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 Freeport i.e., Freeport and Vital Farms go up and down completely randomly.

Pair Corralation between Freeport and Vital Farms

Assuming the 90 days trading horizon Freeport McMoRan 425 percent is expected to under-perform the Vital Farms. But the bond apears to be less risky and, when comparing its historical volatility, Freeport McMoRan 425 percent is 4.87 times less risky than Vital Farms. The bond trades about -0.08 of its potential returns per unit of risk. The Vital Farms is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,873  in Vital Farms on October 10, 2024 and sell it today you would lose (113.00) from holding Vital Farms or give up 2.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Freeport McMoRan 425 percent  vs.  Vital Farms

Freeport McMoRan 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 425 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Freeport and Vital Farms

The main advantage of trading using opposite Freeport and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport 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 Freeport McMoRan 425 percent 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.