Correlation Between Fresh Del and Freshpet

Can any of the company-specific risk be diversified away by investing in both Fresh Del 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 Fresh Del and Freshpet 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 Freshpet, you can compare the effects of market volatilities on Fresh Del 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 Fresh Del with a short position of Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Del and Freshpet.

Diversification Opportunities for Fresh Del and Freshpet

0.58

Correlation Coefficient

Fresh Del  Freshpet

Very weak diversification

The 3 months correlation between Fresh and Freshpet is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet 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 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 Fresh Del i.e., Fresh Del and Freshpet go up and down completely randomly.

Pair Corralation between Fresh Del and Freshpet

Considering the 90-day investment horizon Fresh Del is expected to generate 6.27 times less return on investment than Freshpet. But when comparing it to its historical volatility, Fresh Del Monte is 1.66 times less risky than Freshpet. It trades about 0.01 of its potential returns per unit of risk. Freshpet is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,530  in Freshpet on February 5, 2024 and sell it today you would earn a total of  4,428  from holding Freshpet or generate 67.81% return on investment over 90 days.

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

Fresh Del Monte  vs.  Freshpet

Fresh Del Monte

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Fresh Del is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Freshpet

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Freshpet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresh Del and Freshpet

The main advantage of trading using opposite Fresh Del and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del 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 Fresh Del Monte 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.