Correlation Between Village Farms and Better Choice

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

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

Diversification Opportunities for Village Farms and Better Choice

0.36

Correlation Coefficient

Village Farms  Better Choice

Weak diversification

The 3 months correlation between Village and Better is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Village Farms International and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice and Village Farms 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 Village Farms International are associated (or correlated) with Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Village Farms i.e., Village Farms and Better Choice go up and down completely randomly.

Pair Corralation between Village Farms and Better Choice

Considering the 90-day investment horizon Village Farms International is expected to under-perform the Better Choice. But the stock apears to be less risky and, when comparing its historical volatility, Village Farms International is 1.65 times less risky than Better Choice. The stock trades about -0.07 of its potential returns per unit of risk. The Better Choice is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Better Choice on September 16, 2024 and sell it today you would lose (50.00) from holding Better Choice or give up 18.18% of portfolio value over 90 days.

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

Village Farms International  vs.  Better Choice

Village Farms Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Farms International 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Better Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Village Farms and Better Choice

The main advantage of trading using opposite Village Farms and Better Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Farms position performs unexpectedly, Better Choice 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 Better Choice will offset losses from the drop in Better Choice's long position.

The idea behind Village Farms International and Better Choice 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.