Correlation Between Fresh Del and Village Farms

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

By analyzing existing cross correlation between Fresh Del Monte and Village Farms International, you can compare the effects of market volatilities on Fresh Del and Village 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 Fresh Del with a short position of Village Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Del and Village Farms.

Diversification Opportunities for Fresh Del and Village Farms

0.8

Correlation Coefficient

Fresh Del  Village Farms

Very poor diversification

The 3 months correlation between Fresh and Village is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and Village Farms International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Farms Intern and Fresh Del 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 Fresh Del Monte are associated (or correlated) with Village Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Farms Intern has no effect on the direction of Fresh Del i.e., Fresh Del and Village Farms go up and down completely randomly.

Pair Corralation between Fresh Del and Village Farms

Considering the 90-day investment horizon Fresh Del Monte is expected to generate 0.28 times more return on investment than Village Farms. However, Fresh Del Monte is 3.54 times less risky than Village Farms. It trades about -0.19 of its potential returns per unit of risk. Village Farms International is currently generating about -0.19 per unit of risk. If you would invest  2,315  in Fresh Del Monte on March 28, 2024 and sell it today you would lose (105.00) from holding Fresh Del Monte or give up 4.54% of portfolio value over 90 days.

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

Fresh Del Monte  vs.  Village Farms International

Fresh Del Monte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresh Del Monte has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Village Farms Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Farms International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Fresh Del and Village Farms

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

The idea behind Fresh Del Monte and Village Farms International 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.