Correlation Between Check Point and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Check Point 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 Check Point and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Check Point Software and Hormel Foods, you can compare the effects of market volatilities on Check Point 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 Check Point with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Hormel Foods.
Diversification Opportunities for Check Point and Hormel Foods
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Check and Hormel is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Check Point 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 Check Point Software 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 Check Point i.e., Check Point and Hormel Foods go up and down completely randomly.
Pair Corralation between Check Point and Hormel Foods
Assuming the 90 days trading horizon Check Point Software is expected to generate 1.11 times more return on investment than Hormel Foods. However, Check Point is 1.11 times more volatile than Hormel Foods. It trades about 0.24 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.17 per unit of risk. If you would invest 58,754 in Check Point Software on November 4, 2024 and sell it today you would earn a total of 4,738 from holding Check Point Software or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Check Point Software vs. Hormel Foods
Performance |
| Timeline |
| Check Point Software |
| Hormel Foods |
Check Point and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and Hormel Foods
The main advantage of trading using opposite Check Point and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point 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.| Check Point vs. United Natural Foods, | Check Point vs. Lloyds Banking Group | Check Point vs. Synchrony Financial | Check Point vs. Tyson Foods |
| Hormel Foods vs. British American Tobacco | Hormel Foods vs. Nordon Indstrias Metalrgicas | Hormel Foods vs. Marfrig Global Foods | Hormel Foods vs. Burlington Stores, |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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