Correlation Between EPSILON HEALTHCARE and Freshpet

Can any of the company-specific risk be diversified away by investing in both EPSILON HEALTHCARE 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 EPSILON HEALTHCARE and Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EPSILON HEALTHCARE LTD and Freshpet, you can compare the effects of market volatilities on EPSILON HEALTHCARE 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 EPSILON HEALTHCARE with a short position of Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPSILON HEALTHCARE and Freshpet.

Diversification Opportunities for EPSILON HEALTHCARE and Freshpet

0.0

Correlation Coefficient

EPSILON HEALTHCARE  Freshpet

Pay attention - limited upside

The 3 months correlation between EPSILON and Freshpet is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EPSILON HEALTHCARE LTD and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and EPSILON HEALTHCARE 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 EPSILON HEALTHCARE LTD 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 EPSILON HEALTHCARE i.e., EPSILON HEALTHCARE and Freshpet go up and down completely randomly.

Pair Corralation between EPSILON HEALTHCARE and Freshpet

Assuming the 90 days trading horizon EPSILON HEALTHCARE LTD is expected to generate 5.63 times more return on investment than Freshpet. However, EPSILON HEALTHCARE is 5.63 times more volatile than Freshpet. It trades about 0.05 of its potential returns per unit of risk. Freshpet is currently generating about 0.09 per unit of risk. If you would invest  1.10  in EPSILON HEALTHCARE LTD on October 22, 2024 and sell it today you would lose (0.35) from holding EPSILON HEALTHCARE LTD or give up 31.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

EPSILON HEALTHCARE LTD  vs.  Freshpet

EPSILON HEALTHCARE LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPSILON HEALTHCARE LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, EPSILON HEALTHCARE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Freshpet

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Freshpet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EPSILON HEALTHCARE and Freshpet

The main advantage of trading using opposite EPSILON HEALTHCARE and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EPSILON HEALTHCARE 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.

The idea behind EPSILON HEALTHCARE LTD and Freshpet pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.