Correlation Between Citigroup and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Hormel Foods, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Hormel Foods.
Diversification Opportunities for Citigroup and Hormel Foods
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Hormel is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Hormel Foods go up and down completely randomly.
Pair Corralation between Citigroup and Hormel Foods
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.96 times more return on investment than Hormel Foods. However, Citigroup is 1.04 times less risky than Hormel Foods. It trades about 0.12 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.01 per unit of risk. If you would invest 4,004 in Citigroup on September 12, 2024 and sell it today you would earn a total of 3,200 from holding Citigroup or generate 79.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.51% |
| Values | Daily Returns |
Citigroup vs. Hormel Foods
Performance |
| Timeline |
| Citigroup |
| Hormel Foods |
Citigroup and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Hormel Foods
The main advantage of trading using opposite Citigroup and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Hormel Foods vs. Shenandoah Telecommunications | Hormel Foods vs. Iridium Communications | Hormel Foods vs. Ribbon Communications | Hormel Foods vs. Citic Telecom International |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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