Correlation Between Freshpet and British Amer

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

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

Diversification Opportunities for Freshpet and British Amer

-0.63

Correlation Coefficient

Freshpet  British Amer

Excellent diversification

The 3 months correlation between Freshpet and British is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Freshpet and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Freshpet 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 Freshpet are associated (or correlated) with British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Freshpet i.e., Freshpet and British Amer go up and down completely randomly.

Pair Corralation between Freshpet and British Amer

Given the investment horizon of 90 days Freshpet is expected to under-perform the British Amer. In addition to that, Freshpet is 2.5 times more volatile than British American Tobacco. It trades about -0.22 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.15 per unit of volatility. If you would invest  3,630  in British American Tobacco on January 5, 2025 and sell it today you would earn a total of  562.00  from holding British American Tobacco or generate 15.48% return on investment over 90 days.

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

Freshpet  vs.  British American Tobacco

Freshpet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freshpet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

British American Tobacco

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, British Amer demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freshpet and British Amer

The main advantage of trading using opposite Freshpet and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freshpet position performs unexpectedly, British Amer 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 British Amer will offset losses from the drop in British Amer's long position.

The idea behind Freshpet and British American Tobacco 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.