Correlation Between Edible Garden and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Edible Garden 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 Edible Garden and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edible Garden AG and Hormel Foods, you can compare the effects of market volatilities on Edible Garden 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 Edible Garden with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edible Garden and Hormel Foods.
Diversification Opportunities for Edible Garden and Hormel Foods
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edible and Hormel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Edible Garden AG and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Edible Garden 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 Edible Garden AG 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 Edible Garden i.e., Edible Garden and Hormel Foods go up and down completely randomly.
Pair Corralation between Edible Garden and Hormel Foods
Given the investment horizon of 90 days Edible Garden AG is expected to under-perform the Hormel Foods. In addition to that, Edible Garden is 6.74 times more volatile than Hormel Foods. It trades about -0.06 of its total potential returns per unit of risk. Hormel Foods is currently generating about -0.03 per unit of volatility. If you would invest 3,094 in Hormel Foods on August 27, 2024 and sell it today you would lose (27.00) from holding Hormel Foods or give up 0.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edible Garden AG vs. Hormel Foods
Performance |
| Timeline |
| Edible Garden AG |
| Hormel Foods |
Edible Garden and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edible Garden and Hormel Foods
The main advantage of trading using opposite Edible Garden and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edible Garden 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.| Edible Garden vs. Golden Agri Resources | Edible Garden vs. Vital Farms | Edible Garden vs. Local Bounti Corp | Edible Garden vs. Fresh Del Monte |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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