Correlation Between Freshpet and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Freshpet and Hormel Foods 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 Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freshpet and Hormel Foods, you can compare the effects of market volatilities on Freshpet and Hormel Foods 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 Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freshpet and Hormel Foods.
Diversification Opportunities for Freshpet and Hormel Foods
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Freshpet and Hormel is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Freshpet and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods 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 Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of Freshpet i.e., Freshpet and Hormel Foods go up and down completely randomly.
Pair Corralation between Freshpet and Hormel Foods
Given the investment horizon of 90 days Freshpet is expected to under-perform the Hormel Foods. In addition to that, Freshpet is 1.98 times more volatile than Hormel Foods. It trades about -0.32 of its total potential returns per unit of risk. Hormel Foods is currently generating about -0.17 per unit of volatility. If you would invest 2,993 in Hormel Foods on November 18, 2024 and sell it today you would lose (147.00) from holding Hormel Foods or give up 4.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freshpet vs. Hormel Foods
Performance |
| Timeline |
| Freshpet |
| Hormel Foods |
Freshpet and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freshpet and Hormel Foods
The main advantage of trading using opposite Freshpet and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freshpet position performs unexpectedly, Hormel Foods 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 Hormel Foods will offset losses from the drop in Hormel Foods' long position.| Freshpet vs. Post Holdings | Freshpet vs. Simply Good Foods | Freshpet vs. Treehouse Foods | Freshpet vs. J J Snack |
| Hormel Foods vs. Campbell Soup | Hormel Foods vs. General Mills | Hormel Foods vs. Kellanova | Hormel Foods vs. Lamb Weston Holdings |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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