Correlation Between Farmmi and Freshpet

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

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

Diversification Opportunities for Farmmi and Freshpet

-0.73

Correlation Coefficient

Farmmi  Freshpet

Pay attention - limited upside

The 3 months correlation between Farmmi and Freshpet is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and Farmmi 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 Farmmi Inc are associated (or correlated) with Freshpet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freshpet has no effect on the direction of Farmmi i.e., Farmmi and Freshpet go up and down completely randomly.

Pair Corralation between Farmmi and Freshpet

Given the investment horizon of 90 days Farmmi Inc is expected to under-perform the Freshpet. In addition to that, Farmmi is 1.56 times more volatile than Freshpet. It trades about -0.15 of its total potential returns per unit of risk. Freshpet is currently generating about 0.08 per unit of volatility. If you would invest  6,913  in Freshpet on January 28, 2024 and sell it today you would earn a total of  3,723  from holding Freshpet or generate 53.86% return on investment over 90 days.

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

Farmmi Inc  vs.  Freshpet

Farmmi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmmi Inc 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 primary indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Freshpet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Freshpet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmmi and Freshpet

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

The idea behind Farmmi Inc and Freshpet 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..