Correlation Between Ford and Vital Farms
Can any of the company-specific risk be diversified away by investing in both Ford and Vital Farms 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 Ford and Vital Farms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Vital Farms, you can compare the effects of market volatilities on Ford and Vital Farms 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 Ford with a short position of Vital Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Vital Farms.
Diversification Opportunities for Ford and Vital Farms
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ford and Vital is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Ford 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 Ford Motor are associated (or correlated) with Vital Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Farms has no effect on the direction of Ford i.e., Ford and Vital Farms go up and down completely randomly.
Pair Corralation between Ford and Vital Farms
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Vital Farms. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.3 times less risky than Vital Farms. The stock trades about -0.09 of its potential returns per unit of risk. The Vital Farms is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 3,938 in Vital Farms on November 9, 2024 and sell it today you would lose (189.00) from holding Vital Farms or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Vital Farms
Performance |
| Timeline |
| Ford Motor |
| Vital Farms |
Ford and Vital Farms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Vital Farms
The main advantage of trading using opposite Ford and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Vital Farms 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 Vital Farms will offset losses from the drop in Vital Farms' long position.The idea behind Ford Motor and Vital Farms 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.| Vital Farms vs. Fresh Del Monte | Vital Farms vs. Alico Inc | Vital Farms vs. SW Seed Company | Vital Farms vs. Adecoagro SA |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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