Correlation Between Village Farms and Calavo Growers

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

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

Diversification Opportunities for Village Farms and Calavo Growers

-0.61

Correlation Coefficient

Village Farms  Calavo Growers

Excellent diversification

The 3 months correlation between Village and Calavo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Village Farms International and Calavo Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calavo Growers and Village 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 Village Farms International are associated (or correlated) with Calavo Growers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calavo Growers has no effect on the direction of Village Farms i.e., Village Farms and Calavo Growers go up and down completely randomly.

Pair Corralation between Village Farms and Calavo Growers

Considering the 90-day investment horizon Village Farms International is expected to under-perform the Calavo Growers. In addition to that, Village Farms is 1.71 times more volatile than Calavo Growers. It trades about -0.01 of its total potential returns per unit of risk. Calavo Growers is currently generating about 0.01 per unit of volatility. If you would invest  2,880  in Calavo Growers on January 31, 2024 and sell it today you would lose (213.00) from holding Calavo Growers or give up 7.4% of portfolio value over 90 days.

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

Village Farms International  vs.  Calavo Growers

Village Farms Intern

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Village Farms International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Village Farms reported solid returns over the last few months and may actually be approaching a breakup point.

Calavo Growers

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calavo Growers are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Calavo Growers is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Village Farms and Calavo Growers

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

The idea behind Village Farms International and Calavo Growers 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.