Correlation Between Village Farms and Edible Garden

Can any of the company-specific risk be diversified away by investing in both Village Farms and Edible Garden 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 Edible Garden 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 Edible Garden AG, you can compare the effects of market volatilities on Village Farms and Edible Garden 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 Edible Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Village Farms and Edible Garden.

Diversification Opportunities for Village Farms and Edible Garden

0.05

Correlation Coefficient

Village Farms  Edible Garden

Significant diversification

The 3 months correlation between Village and Edible is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Village Farms International and Edible Garden AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edible Garden AG 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 Edible Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edible Garden AG has no effect on the direction of Village Farms i.e., Village Farms and Edible Garden go up and down completely randomly.

Pair Corralation between Village Farms and Edible Garden

Considering the 90-day investment horizon Village Farms is expected to generate 484.85 times less return on investment than Edible Garden. But when comparing it to its historical volatility, Village Farms International is 19.34 times less risky than Edible Garden. It trades about 0.01 of its potential returns per unit of risk. Edible Garden AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.66  in Edible Garden AG on October 26, 2024 and sell it today you would lose (3.22) from holding Edible Garden AG or give up 42.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.62%
Values	Daily Returns

Village Farms International  vs.  Edible Garden AG

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Edible Garden AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Edible Garden showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Village Farms and Edible Garden

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

The idea behind Village Farms International and Edible Garden AG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.