Correlation Between Dow Jones and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Hormel Foods, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hormel Foods.
Diversification Opportunities for Dow Jones and Hormel Foods
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Hormel is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Hormel Foods go up and down completely randomly.
Pair Corralation between Dow Jones and Hormel Foods
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.48 times more return on investment than Hormel Foods. However, Dow Jones Industrial is 2.1 times less risky than Hormel Foods. It trades about 0.08 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.04 per unit of risk. If you would invest 3,359,634 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 1,070,017 from holding Dow Jones Industrial or generate 31.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Hormel Foods
Performance |
| Timeline |
Dow Jones and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hormel Foods
Pair trading matchups for Hormel Foods
Pair Trading with Dow Jones and Hormel Foods
The main advantage of trading using opposite Dow Jones and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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