Correlation Between McCormick Company and Freshpet

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Can any of the company-specific risk be diversified away by investing in both McCormick Company 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 McCormick Company and Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McCormick Company Incorporated and Freshpet, you can compare the effects of market volatilities on McCormick Company 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 McCormick Company with a short position of Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and Freshpet.

Diversification Opportunities for McCormick Company and Freshpet

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between McCormick and Freshpet is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet and McCormick Company 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 McCormick Company Incorporated 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 McCormick Company i.e., McCormick Company and Freshpet go up and down completely randomly.

Pair Corralation between McCormick Company and Freshpet

Considering the 90-day investment horizon McCormick Company Incorporated is expected to under-perform the Freshpet. But the etf apears to be less risky and, when comparing its historical volatility, McCormick Company Incorporated is 1.69 times less risky than Freshpet. The etf trades about -0.01 of its potential returns per unit of risk. The Freshpet is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,707  in Freshpet on December 30, 2023 and sell it today you would earn a total of  4,879  from holding Freshpet or generate 72.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

McCormick Company Incorporated  vs.  Freshpet

 Performance 
       Timeline  
McCormick rporated 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, McCormick Company may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Freshpet 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Freshpet unveiled solid returns over the last few months and may actually be approaching a breakup point.

McCormick Company and Freshpet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McCormick Company and Freshpet

The main advantage of trading using opposite McCormick Company and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company 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 McCormick Company Incorporated 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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