Correlation Between Berkshire Hathaway and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway 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 Berkshire Hathaway and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Hormel Foods, you can compare the effects of market volatilities on Berkshire Hathaway 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 Berkshire Hathaway with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Hormel Foods.
Diversification Opportunities for Berkshire Hathaway and Hormel Foods
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Berkshire and Hormel is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Berkshire Hathaway 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 Berkshire Hathaway 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 Berkshire Hathaway i.e., Berkshire Hathaway and Hormel Foods go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and Hormel Foods
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.78 times more return on investment than Hormel Foods. However, Berkshire Hathaway is 1.28 times less risky than Hormel Foods. It trades about -0.06 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.19 per unit of risk. If you would invest 14,031 in Berkshire Hathaway on October 11, 2024 and sell it today you would lose (169.00) from holding Berkshire Hathaway or give up 1.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Berkshire Hathaway vs. Hormel Foods
Performance |
| Timeline |
| Berkshire Hathaway |
| Hormel Foods |
Berkshire Hathaway and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and Hormel Foods
The main advantage of trading using opposite Berkshire Hathaway and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway 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.| Berkshire Hathaway vs. DXC Technology | Berkshire Hathaway vs. Extra Space Storage | Berkshire Hathaway vs. American Airlines Group | Berkshire Hathaway vs. Seagate Technology Holdings |
| Hormel Foods vs. Seagate Technology Holdings | Hormel Foods vs. The Home Depot | Hormel Foods vs. PENN Entertainment, | Hormel Foods vs. Micron Technology |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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