Correlation Between Freshpet and Herbalife Nutrition

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

By analyzing existing cross correlation between Freshpet and Herbalife Nutrition, you can compare the effects of market volatilities on Freshpet and Herbalife Nutrition 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 Herbalife Nutrition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freshpet and Herbalife Nutrition.

Diversification Opportunities for Freshpet and Herbalife Nutrition

0.66

Correlation Coefficient

Freshpet  Herbalife Nutrition

Poor diversification

The 3 months correlation between Freshpet and Herbalife is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Freshpet and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition 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 Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of Freshpet i.e., Freshpet and Herbalife Nutrition go up and down completely randomly.

Pair Corralation between Freshpet and Herbalife Nutrition

Given the investment horizon of 90 days Freshpet is expected to generate 0.63 times more return on investment than Herbalife Nutrition. However, Freshpet is 1.59 times less risky than Herbalife Nutrition. It trades about 0.09 of its potential returns per unit of risk. Herbalife Nutrition is currently generating about 0.0 per unit of risk. If you would invest  13,715  in Freshpet on September 3, 2024 and sell it today you would earn a total of  1,590  from holding Freshpet or generate 11.59% return on investment over 90 days.

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

Freshpet  vs.  Herbalife Nutrition

Freshpet

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Freshpet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Herbalife Nutrition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Freshpet and Herbalife Nutrition

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

The idea behind Freshpet and Herbalife Nutrition 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.