Correlation Between Vital Farms and Stepan
Can any of the company-specific risk be diversified away by investing in both Vital Farms and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vital Farms and Stepan Company, you can compare the effects of market volatilities on Vital Farms and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Farms and Stepan.
Diversification Opportunities for Vital Farms and Stepan
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vital and Stepan is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Vital Farms i.e., Vital Farms and Stepan go up and down completely randomly.
Pair Corralation between Vital Farms and Stepan
Given the investment horizon of 90 days Vital Farms is expected to generate 1.66 times more return on investment than Stepan. However, Vital Farms is 1.66 times more volatile than Stepan Company. It trades about 0.32 of its potential returns per unit of risk. Stepan Company is currently generating about -0.2 per unit of risk. If you would invest 3,874 in Vital Farms on October 20, 2024 and sell it today you would earn a total of 627.00 from holding Vital Farms or generate 16.18% 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. Stepan Company
Performance |
| Timeline |
| Vital Farms |
| Stepan Company |
Vital Farms and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vital Farms and Stepan
The main advantage of trading using opposite Vital Farms and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital Farms position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Vital Farms vs. Kellanova | Vital Farms vs. Bunge Limited | Vital Farms vs. Lamb Weston Holdings | Vital Farms vs. Altria Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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