Correlation Between Hormel Foods and Associated British
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Associated British 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 Hormel Foods and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Associated British Foods, you can compare the effects of market volatilities on Hormel Foods and Associated British 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 Hormel Foods with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Associated British.
Diversification Opportunities for Hormel Foods and Associated British
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hormel and Associated is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Hormel Foods 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 Hormel Foods are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Hormel Foods i.e., Hormel Foods and Associated British go up and down completely randomly.
Pair Corralation between Hormel Foods and Associated British
Considering the 90-day investment horizon Hormel Foods is expected to under-perform the Associated British. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.98 times less risky than Associated British. The stock trades about -0.04 of its potential returns per unit of risk. The Associated British Foods is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,869 in Associated British Foods on January 24, 2024 and sell it today you would earn a total of 1,186 from holding Associated British Foods or generate 63.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 74.19% |
Values | Daily Returns |
Hormel Foods vs. Associated British Foods
Performance |
Timeline |
Hormel Foods |
Associated British Foods |
Hormel Foods and Associated British Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hormel Foods and Associated British
The main advantage of trading using opposite Hormel Foods and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.Hormel Foods vs. Bunge Limited | Hormel Foods vs. Archer Daniels Midland | Hormel Foods vs. Fresh Del Monte | Hormel Foods vs. Limoneira Co |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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