Correlation Between Hormel Foods and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Citizens Financial 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 Hormel Foods and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Citizens Financial Group,, you can compare the effects of market volatilities on Hormel Foods and Citizens Financial 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 Hormel Foods with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Citizens Financial.
Diversification Opportunities for Hormel Foods and Citizens Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hormel and Citizens is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Citizens Financial Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Group, and Hormel Foods 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 Hormel Foods are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Group, has no effect on the direction of Hormel Foods i.e., Hormel Foods and Citizens Financial go up and down completely randomly.
Pair Corralation between Hormel Foods and Citizens Financial
Assuming the 90 days trading horizon Hormel Foods is expected to under-perform the Citizens Financial. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.73 times less risky than Citizens Financial. The stock trades about -0.02 of its potential returns per unit of risk. The Citizens Financial Group, is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 20,261 in Citizens Financial Group, on October 19, 2024 and sell it today you would earn a total of 7,554 from holding Citizens Financial Group, or generate 37.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Citizens Financial Group,
Performance |
| Timeline |
| Hormel Foods |
| Citizens Financial Group, |
Hormel Foods and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Citizens Financial
The main advantage of trading using opposite Hormel Foods and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Citizens Financial 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.| Hormel Foods vs. Taiwan Semiconductor Manufacturing | Hormel Foods vs. Apple Inc | Hormel Foods vs. Alibaba Group Holding | Hormel Foods vs. Microsoft |
| Citizens Financial vs. Hormel Foods | Citizens Financial vs. United Natural Foods, | Citizens Financial vs. Alaska Air Group, | Citizens Financial vs. Verizon Communications |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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