Correlation Between Vital Farms and Premium Catering

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

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

Diversification Opportunities for Vital Farms and Premium Catering

0.43

Correlation Coefficient

Vital Farms  Premium Catering

Very weak diversification

The 3 months correlation between Vital and Premium is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Premium Catering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Catering 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 Premium Catering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Catering has no effect on the direction of Vital Farms i.e., Vital Farms and Premium Catering go up and down completely randomly.

Pair Corralation between Vital Farms and Premium Catering

Given the investment horizon of 90 days Vital Farms is expected to generate 0.27 times more return on investment than Premium Catering. However, Vital Farms is 3.69 times less risky than Premium Catering. It trades about 0.13 of its potential returns per unit of risk. Premium Catering Limited is currently generating about -0.09 per unit of risk. If you would invest  1,519  in Vital Farms on October 9, 2024 and sell it today you would earn a total of  2,241  from holding Vital Farms or generate 147.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	29.15%
Values	Daily Returns

Vital Farms  vs.  Premium Catering Limited

Vital Farms

Risk-Adjusted Performance

0 of 100

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.

Premium Catering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Catering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Vital Farms and Premium Catering

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

The idea behind Vital Farms and Premium Catering Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.