Correlation Between Lamb Weston and Freshpet
Can any of the company-specific risk be diversified away by investing in both Lamb Weston 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 Lamb Weston and Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamb Weston Holdings and Freshpet, you can compare the effects of market volatilities on Lamb Weston 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 Lamb Weston with a short position of Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Freshpet.
Diversification Opportunities for Lamb Weston and Freshpet
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lamb and Freshpet is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and Lamb Weston 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 Lamb Weston Holdings 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 Lamb Weston i.e., Lamb Weston and Freshpet go up and down completely randomly.
Pair Corralation between Lamb Weston and Freshpet
Allowing for the 90-day total investment horizon Lamb Weston is expected to generate 3.7 times less return on investment than Freshpet. But when comparing it to its historical volatility, Lamb Weston Holdings is 1.65 times less risky than Freshpet. It trades about 0.03 of its potential returns per unit of risk. Freshpet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,313 in Freshpet on January 25, 2024 and sell it today you would earn a total of 5,147 from holding Freshpet or generate 96.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamb Weston Holdings vs. Freshpet
Performance |
| Timeline |
| Lamb Weston Holdings |
| Freshpet |
Lamb Weston and Freshpet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and Freshpet
The main advantage of trading using opposite Lamb Weston and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston 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.| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy Common Stock | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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