Correlation Between Vital Farms and Universal

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

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

Diversification Opportunities for Vital Farms and Universal

-0.58

Correlation Coefficient

Vital Farms  Universal

Excellent diversification

The 3 months correlation between Vital and Universal is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Vital Farms i.e., Vital Farms and Universal go up and down completely randomly.

Pair Corralation between Vital Farms and Universal

Given the investment horizon of 90 days Vital Farms is expected to under-perform the Universal. In addition to that, Vital Farms is 4.12 times more volatile than Universal. It trades about -0.42 of its total potential returns per unit of risk. Universal is currently generating about -0.02 per unit of volatility. If you would invest  5,395  in Universal on November 28, 2024 and sell it today you would lose (17.00) from holding Universal or give up 0.32% of portfolio value over 90 days.

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

Vital Farms  vs.  Universal

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.

Universal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vital Farms and Universal

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

The idea behind Vital Farms and Universal 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.