Correlation Between Freshpet and Natural Alternatives
Can any of the company-specific risk be diversified away by investing in both Freshpet and Natural Alternatives 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 Natural Alternatives into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freshpet and Natural Alternatives International, you can compare the effects of market volatilities on Freshpet and Natural Alternatives 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 Natural Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freshpet and Natural Alternatives.
Diversification Opportunities for Freshpet and Natural Alternatives
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Freshpet and Natural is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Freshpet and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives 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 Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of Freshpet i.e., Freshpet and Natural Alternatives go up and down completely randomly.
Pair Corralation between Freshpet and Natural Alternatives
Given the investment horizon of 90 days Freshpet is expected to under-perform the Natural Alternatives. But the stock apears to be less risky and, when comparing its historical volatility, Freshpet is 1.93 times less risky than Natural Alternatives. The stock trades about -0.24 of its potential returns per unit of risk. The Natural Alternatives International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 606.00 in Natural Alternatives International on January 29, 2024 and sell it today you would earn a total of 19.00 from holding Natural Alternatives International or generate 3.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Freshpet vs. Natural Alternatives Internati
Performance |
Timeline |
Freshpet |
Natural Alternatives |
Freshpet and Natural Alternatives Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Freshpet and Natural Alternatives
The main advantage of trading using opposite Freshpet and Natural Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freshpet position performs unexpectedly, Natural Alternatives 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 Natural Alternatives will offset losses from the drop in Natural Alternatives' long position.Freshpet vs. Post Holdings | Freshpet vs. Simply Good Foods | Freshpet vs. Treehouse Foods | Freshpet vs. J J Snack |
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Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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