Correlation Between Vital Farms and Farmmi

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

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

Diversification Opportunities for Vital Farms and Farmmi

0.72

Correlation Coefficient

Vital Farms  Farmmi

Poor diversification

The 3 months correlation between Vital and Farmmi is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and Farmmi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmmi Inc 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 Farmmi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmmi Inc has no effect on the direction of Vital Farms i.e., Vital Farms and Farmmi go up and down completely randomly.

Pair Corralation between Vital Farms and Farmmi

Given the investment horizon of 90 days Vital Farms is expected to generate 3.13 times less return on investment than Farmmi. But when comparing it to its historical volatility, Vital Farms is 7.92 times less risky than Farmmi. It trades about 0.07 of its potential returns per unit of risk. Farmmi Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  507.00  in Farmmi Inc on January 10, 2025 and sell it today you would lose (341.00) from holding Farmmi Inc or give up 67.26% of portfolio value over 90 days.

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

Vital Farms  vs.  Farmmi Inc

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Farmmi Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Farmmi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Vital Farms and Farmmi

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

The idea behind Vital Farms and Farmmi Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.