Correlation Between Hormel Foods and Hanover Foods

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

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

Diversification Opportunities for Hormel Foods and Hanover Foods

0.58

Correlation Coefficient

Hormel Foods  Hanover Foods

Very weak diversification

The 3 months correlation between Hormel and Hanover is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover 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 Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of Hormel Foods i.e., Hormel Foods and Hanover Foods go up and down completely randomly.

Pair Corralation between Hormel Foods and Hanover Foods

If you would invest  3,422  in Hormel Foods on January 20, 2024 and sell it today you would earn a total of  52.00  from holding Hormel Foods or generate 1.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.3%
Values	Daily Returns

Hormel Foods  vs.  Hanover Foods

Hormel Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Hormel Foods disclosed solid returns over the last few months and may actually be approaching a breakup point.

Hanover Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanover Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hanover Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hormel Foods and Hanover Foods

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

The idea behind Hormel Foods and Hanover 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.