Correlation Between Danone PK and Hormel Foods

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

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

Diversification Opportunities for Danone PK and Hormel Foods

0.0

Correlation Coefficient

Danone PK  Hormel Foods

Pay attention - limited upside

The 3 months correlation between Danone and Hormel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Danone PK and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Danone PK 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 Danone PK are associated (or correlated) with Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of Danone PK i.e., Danone PK and Hormel Foods go up and down completely randomly.

Pair Corralation between Danone PK and Hormel Foods

If you would invest  3,017  in Hormel Foods on January 25, 2024 and sell it today you would earn a total of  497.00  from holding Hormel Foods or generate 16.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Danone PK  vs.  Hormel Foods

Danone PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Danone PK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hormel Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Hormel Foods disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danone PK and Hormel Foods

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

The idea behind Danone PK and Hormel Foods 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.