Correlation Between Lancaster Colony and Freshpet
Can any of the company-specific risk be diversified away by investing in both Lancaster Colony 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 Lancaster Colony and Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lancaster Colony and Freshpet, you can compare the effects of market volatilities on Lancaster Colony 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 Lancaster Colony with a short position of Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Freshpet.
Diversification Opportunities for Lancaster Colony and Freshpet
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lancaster and Freshpet is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and Lancaster Colony 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 Lancaster Colony 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 Lancaster Colony i.e., Lancaster Colony and Freshpet go up and down completely randomly.
Pair Corralation between Lancaster Colony and Freshpet
Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the Freshpet. But the stock apears to be less risky and, when comparing its historical volatility, Lancaster Colony is 1.49 times less risky than Freshpet. The stock trades about 0.0 of its potential returns per unit of risk. The Freshpet is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,373 in Freshpet on January 24, 2024 and sell it today you would earn a total of 4,102 from holding Freshpet or generate 64.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lancaster Colony vs. Freshpet
Performance |
| Timeline |
| Lancaster Colony |
| Freshpet |
Lancaster Colony and Freshpet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lancaster Colony and Freshpet
The main advantage of trading using opposite Lancaster Colony and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony 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.| Lancaster Colony vs. Bunge Limited | Lancaster Colony vs. Archer Daniels Midland | Lancaster Colony vs. Fresh Del Monte | Lancaster Colony vs. Limoneira Co |
| Freshpet vs. Bunge Limited | Freshpet vs. Archer Daniels Midland | Freshpet vs. Fresh Del Monte | Freshpet vs. Limoneira Co |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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