Correlation Between Vital Farms and BK Technologies

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

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

Diversification Opportunities for Vital Farms and BK Technologies

0.47

Correlation Coefficient

Vital Farms  BK Technologies

Very weak diversification

The 3 months correlation between Vital and BKTI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and BK Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Technologies 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 BK Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Technologies has no effect on the direction of Vital Farms i.e., Vital Farms and BK Technologies go up and down completely randomly.

Pair Corralation between Vital Farms and BK Technologies

Given the investment horizon of 90 days Vital Farms is expected to under-perform the BK Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Vital Farms is 1.33 times less risky than BK Technologies. The stock trades about -0.06 of its potential returns per unit of risk. The BK Technologies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,187  in BK Technologies on December 18, 2024 and sell it today you would lose (101.00) from holding BK Technologies or give up 3.17% of portfolio value over 90 days.

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

Vital Farms  vs.  BK Technologies

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BK Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, BK Technologies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vital Farms and BK Technologies

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

The idea behind Vital Farms and BK Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.