Correlation Between Hormel Foods and Freshpet
Can any of the company-specific risk be diversified away by investing in both Hormel Foods 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 Hormel Foods and Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Freshpet, you can compare the effects of market volatilities on Hormel Foods 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 Hormel Foods with a short position of Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Freshpet.
Diversification Opportunities for Hormel Foods and Freshpet
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hormel and Freshpet is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and Hormel Foods 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 Hormel Foods 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 Hormel Foods i.e., Hormel Foods and Freshpet go up and down completely randomly.
Pair Corralation between Hormel Foods and Freshpet
Considering the 90-day investment horizon Hormel Foods is expected to generate 8.48 times less return on investment than Freshpet. But when comparing it to its historical volatility, Hormel Foods is 2.38 times less risky than Freshpet. It trades about 0.06 of its potential returns per unit of risk. 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Freshpet
Performance |
| Timeline |
| Hormel Foods |
| Freshpet |
Hormel Foods and Freshpet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Freshpet
The main advantage of trading using opposite Hormel Foods and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods 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.| Hormel Foods vs. Campbell Soup | Hormel Foods vs. General Mills | Hormel Foods vs. Kellanova | Hormel Foods vs. Lamb Weston Holdings |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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