Correlation Between Vital Farms and Altria

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

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

Diversification Opportunities for Vital Farms and Altria

-0.71

Correlation Coefficient

Vital Farms  Altria

Pay attention - limited upside

The 3 months correlation between Vital and Altria is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Vital Farms i.e., Vital Farms and Altria go up and down completely randomly.

Pair Corralation between Vital Farms and Altria

Given the investment horizon of 90 days Vital Farms is expected to generate 1.53 times less return on investment than Altria. In addition to that, Vital Farms is 2.48 times more volatile than Altria Group. It trades about 0.03 of its total potential returns per unit of risk. Altria Group is currently generating about 0.11 per unit of volatility. If you would invest  5,273  in Altria Group on August 30, 2024 and sell it today you would earn a total of  492.00  from holding Altria Group or generate 9.33% return on investment over 90 days.

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

Vital Farms  vs.  Altria Group

Vital Farms

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Altria Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Altria may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vital Farms and Altria

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

The idea behind Vital Farms and Altria Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.