Correlation Between General Mills and Freshpet

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

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

Diversification Opportunities for General Mills and Freshpet

-0.71

Correlation Coefficient

General Mills  Freshpet

Pay attention - limited upside

The 3 months correlation between General and Freshpet is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and General Mills 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 General Mills 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 General Mills i.e., General Mills and Freshpet go up and down completely randomly.

Pair Corralation between General Mills and Freshpet

Assuming the 90 days trading horizon General Mills is expected to under-perform the Freshpet. But the stock apears to be less risky and, when comparing its historical volatility, General Mills is 2.19 times less risky than Freshpet. The stock trades about -0.09 of its potential returns per unit of risk. The Freshpet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  12,875  in Freshpet on October 5, 2024 and sell it today you would earn a total of  1,400  from holding Freshpet or generate 10.87% return on investment over 90 days.

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

General Mills  vs.  Freshpet

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, General Mills is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Freshpet

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Freshpet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Freshpet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Mills and Freshpet

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