Correlation Between AM EAGLE and Freshpet

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

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

Diversification Opportunities for AM EAGLE and Freshpet

-0.58

Correlation Coefficient

AM EAGLE  Freshpet

Excellent diversification

The 3 months correlation between AFG and Freshpet is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and AM EAGLE 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 AM EAGLE OUTFITTERS 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 AM EAGLE i.e., AM EAGLE and Freshpet go up and down completely randomly.

Pair Corralation between AM EAGLE and Freshpet

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to generate 3.36 times more return on investment than Freshpet. However, AM EAGLE is 3.36 times more volatile than Freshpet. It trades about -0.06 of its potential returns per unit of risk. Freshpet is currently generating about -0.4 per unit of risk. If you would invest  1,700  in AM EAGLE OUTFITTERS on September 23, 2024 and sell it today you would lose (100.00) from holding AM EAGLE OUTFITTERS or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AM EAGLE OUTFITTERS  vs.  Freshpet

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AM EAGLE OUTFITTERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Freshpet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Freshpet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AM EAGLE and Freshpet

The main advantage of trading using opposite AM EAGLE and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE 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 AM EAGLE OUTFITTERS 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.