Correlation Between Blue Star and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Blue Star 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 Blue Star and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Star Foods and Hormel Foods, you can compare the effects of market volatilities on Blue Star 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 Blue Star with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Star and Hormel Foods.
Diversification Opportunities for Blue Star and Hormel Foods
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and Hormel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Foods and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Blue Star 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 Blue Star 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 Blue Star i.e., Blue Star and Hormel Foods go up and down completely randomly.
Pair Corralation between Blue Star and Hormel Foods
Given the investment horizon of 90 days Blue Star Foods is expected to under-perform the Hormel Foods. In addition to that, Blue Star is 4.8 times more volatile than Hormel Foods. It trades about -0.35 of its total potential returns per unit of risk. Hormel Foods is currently generating about 0.06 per unit of volatility. If you would invest 3,094 in Hormel Foods on August 28, 2024 and sell it today you would earn a total of 49.00 from holding Hormel Foods or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Star Foods vs. Hormel Foods
Performance |
| Timeline |
| Blue Star Foods |
| Hormel Foods |
Blue Star and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Star and Hormel Foods
The main advantage of trading using opposite Blue Star and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Star 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.| Blue Star vs. Better Choice | Blue Star vs. Stryve Foods | Blue Star vs. BioAdaptives | Blue Star vs. Beyond Oil |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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