Correlation Between Freshpet and Kellanova

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

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

Diversification Opportunities for Freshpet and Kellanova

0.38

Correlation Coefficient

Freshpet  Kellanova

Weak diversification

The 3 months correlation between Freshpet and Kellanova is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Freshpet and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Freshpet 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 Freshpet are associated (or correlated) with Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Freshpet i.e., Freshpet and Kellanova go up and down completely randomly.

Pair Corralation between Freshpet and Kellanova

Given the investment horizon of 90 days Freshpet is expected to under-perform the Kellanova. In addition to that, Freshpet is 1.79 times more volatile than Kellanova. It trades about -0.12 of its total potential returns per unit of risk. Kellanova is currently generating about 0.08 per unit of volatility. If you would invest  5,520  in Kellanova on January 19, 2024 and sell it today you would earn a total of  97.00  from holding Kellanova or generate 1.76% return on investment over 90 days.

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

Freshpet  vs.  Kellanova

Freshpet

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 8 (%) 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.

Kellanova

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Freshpet and Kellanova

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

The idea behind Freshpet and Kellanova 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.