Correlation Between Kraft Heinz and Freshpet

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

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

Diversification Opportunities for Kraft Heinz and Freshpet

-0.67

Correlation Coefficient

Kraft Heinz  Freshpet

Excellent diversification

The 3 months correlation between Kraft and Freshpet is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and Kraft Heinz 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 Kraft Heinz Co 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 Kraft Heinz i.e., Kraft Heinz and Freshpet go up and down completely randomly.

Pair Corralation between Kraft Heinz and Freshpet

Assuming the 90 days trading horizon Kraft Heinz Co is expected to under-perform the Freshpet. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 1.85 times less risky than Freshpet. The stock trades about -0.06 of its potential returns per unit of risk. The Freshpet is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,295  in Freshpet on October 4, 2024 and sell it today you would earn a total of  1,640  from holding Freshpet or generate 13.34% return on investment over 90 days.

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

Kraft Heinz Co  vs.  Freshpet

Kraft Heinz

Risk-Adjusted Performance

0 of 100

Very Weak

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

Freshpet

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Freshpet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kraft Heinz and Freshpet

The main advantage of trading using opposite Kraft Heinz and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraft Heinz 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 Kraft Heinz Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.