Correlation Between BG Foods and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both BG Foods 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 BG Foods and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BG Foods and Hormel Foods, you can compare the effects of market volatilities on BG Foods 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 BG Foods with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Hormel Foods.
Diversification Opportunities for BG Foods and Hormel Foods
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BGS and Hormel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and BG 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 BG Foods 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 BG Foods i.e., BG Foods and Hormel Foods go up and down completely randomly.
Pair Corralation between BG Foods and Hormel Foods
Considering the 90-day investment horizon BG Foods is expected to under-perform the Hormel Foods. In addition to that, BG Foods is 2.06 times more volatile than Hormel Foods. It trades about -0.03 of its total potential returns per unit of risk. Hormel Foods is currently generating about -0.02 per unit of volatility. If you would invest 3,862 in Hormel Foods on August 31, 2024 and sell it today you would lose (619.00) from holding Hormel Foods or give up 16.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
BG Foods vs. Hormel Foods
Performance |
| Timeline |
| BG Foods |
| Hormel Foods |
BG Foods and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BG Foods and Hormel Foods
The main advantage of trading using opposite BG Foods and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods 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 BG Foods 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.| Hormel Foods vs. Campbell Soup | Hormel Foods vs. General Mills | Hormel Foods vs. Kellanova | Hormel Foods vs. Lamb Weston Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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