Correlation Between Dollar General and Freshpet
Can any of the company-specific risk be diversified away by investing in both Dollar General 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 Dollar General and Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar General and Freshpet, you can compare the effects of market volatilities on Dollar General 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 Dollar General with a short position of Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar General and Freshpet.
Diversification Opportunities for Dollar General and Freshpet
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dollar and Freshpet is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dollar General and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and Dollar General 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 Dollar General 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 Dollar General i.e., Dollar General and Freshpet go up and down completely randomly.
Pair Corralation between Dollar General and Freshpet
Allowing for the 90-day total investment horizon Dollar General is expected to under-perform the Freshpet. But the stock apears to be less risky and, when comparing its historical volatility, Dollar General is 1.6 times less risky than Freshpet. The stock trades about -0.13 of its potential returns per unit of risk. The Freshpet is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 13,468 in Freshpet on August 28, 2024 and sell it today you would earn a total of 2,000 from holding Freshpet or generate 14.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollar General vs. Freshpet
Performance |
| Timeline |
| Dollar General |
| Freshpet |
Dollar General and Freshpet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar General and Freshpet
The main advantage of trading using opposite Dollar General and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar General 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.| Dollar General vs. Innovative Food Hldg | Dollar General vs. Calavo Growers | Dollar General vs. The Chefs Warehouse | Dollar General vs. AMCON Distributing |
| Freshpet vs. Post Holdings | Freshpet vs. Simply Good Foods | Freshpet vs. Treehouse Foods | Freshpet vs. J J Snack |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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