Correlation Between Vital Farms and Alico

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

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

Diversification Opportunities for Vital Farms and Alico

0.55

Correlation Coefficient

Vital Farms  Alico

Very weak diversification

The 3 months correlation between Vital and Alico is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Alico Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alico Inc and Vital 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 Vital Farms are associated (or correlated) with Alico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alico Inc has no effect on the direction of Vital Farms i.e., Vital Farms and Alico go up and down completely randomly.

Pair Corralation between Vital Farms and Alico

Given the investment horizon of 90 days Vital Farms is expected to under-perform the Alico. But the stock apears to be less risky and, when comparing its historical volatility, Vital Farms is 1.1 times less risky than Alico. The stock trades about -0.01 of its potential returns per unit of risk. The Alico Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,675  in Alico Inc on November 28, 2024 and sell it today you would earn a total of  290.00  from holding Alico Inc or generate 10.84% return on investment over 90 days.

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

Vital Farms  vs.  Alico Inc

Vital Farms

Risk-Adjusted Performance

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.

Alico Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Alico displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vital Farms and Alico

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

The idea behind Vital Farms and Alico Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.