Correlation Between General Mills and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both General Mills 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 General Mills and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Mills and Hormel Foods, you can compare the effects of market volatilities on General Mills 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 General Mills with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and Hormel Foods.
Diversification Opportunities for General Mills and Hormel Foods
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between General and Hormel is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and General Mills 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 General Mills 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 General Mills i.e., General Mills and Hormel Foods go up and down completely randomly.
Pair Corralation between General Mills and Hormel Foods
Considering the 90-day investment horizon General Mills is expected to generate 0.77 times more return on investment than Hormel Foods. However, General Mills is 1.29 times less risky than Hormel Foods. It trades about -0.03 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.04 per unit of risk. If you would invest 8,170 in General Mills on August 28, 2024 and sell it today you would lose (1,617) from holding General Mills or give up 19.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Mills vs. Hormel Foods
Performance |
| Timeline |
| General Mills |
| Hormel Foods |
General Mills and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Mills and Hormel Foods
The main advantage of trading using opposite General Mills and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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.| General Mills vs. Campbell Soup | General Mills vs. Kraft Heinz Co | General Mills vs. ConAgra Foods | General Mills vs. Hormel Foods |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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