Correlation Between Bon Natural and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Bon Natural 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 Bon Natural and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bon Natural Life and Hormel Foods, you can compare the effects of market volatilities on Bon Natural 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 Bon Natural with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bon Natural and Hormel Foods.
Diversification Opportunities for Bon Natural and Hormel Foods
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bon and Hormel is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Bon Natural 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 Bon Natural Life 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 Bon Natural i.e., Bon Natural and Hormel Foods go up and down completely randomly.
Pair Corralation between Bon Natural and Hormel Foods
Considering the 90-day investment horizon Bon Natural Life is expected to under-perform the Hormel Foods. In addition to that, Bon Natural is 3.07 times more volatile than Hormel Foods. It trades about -0.08 of its total potential returns per unit of risk. Hormel Foods is currently generating about -0.05 per unit of volatility. If you would invest 3,407 in Hormel Foods on August 24, 2024 and sell it today you would lose (357.00) from holding Hormel Foods or give up 10.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bon Natural Life vs. Hormel Foods
Performance |
| Timeline |
| Bon Natural Life |
| Hormel Foods |
Bon Natural and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bon Natural and Hormel Foods
The main advantage of trading using opposite Bon Natural and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bon Natural 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.| Bon Natural vs. Blue Star Foods | Bon Natural vs. Grand Havana | Bon Natural vs. Real Good Food | Bon Natural vs. Central Garden Pet |
| Hormel Foods vs. Better Choice | Hormel Foods vs. BioAdaptives | Hormel Foods vs. Beyond Oil | Hormel Foods vs. Bon Natural Life |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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