Correlation Between Extra Space and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Extra Space 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 Extra Space and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extra Space Storage and Hormel Foods, you can compare the effects of market volatilities on Extra Space 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 Extra Space with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Hormel Foods.
Diversification Opportunities for Extra Space and Hormel Foods
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Extra and Hormel is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Extra Space 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 Extra Space Storage 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 Extra Space i.e., Extra Space and Hormel Foods go up and down completely randomly.
Pair Corralation between Extra Space and Hormel Foods
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.31 times more return on investment than Hormel Foods. However, Extra Space is 1.31 times more volatile than Hormel Foods. It trades about -0.1 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.17 per unit of risk. If you would invest 24,000 in Extra Space Storage on November 5, 2024 and sell it today you would lose (1,013) from holding Extra Space Storage or give up 4.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. Hormel Foods
Performance |
| Timeline |
| Extra Space Storage |
| Hormel Foods |
Extra Space and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Hormel Foods
The main advantage of trading using opposite Extra Space and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space 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.| Extra Space vs. CVS Health | Extra Space vs. Autohome | Extra Space vs. Hospital Mater Dei | Extra Space vs. Universal Health Services, |
| Hormel Foods vs. Paycom Software | Hormel Foods vs. Unity Software | Hormel Foods vs. Check Point Software | Hormel Foods vs. Guidewire Software, |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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