Correlation Between Hormel Foods and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Microchip Technology 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 Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Microchip Technology Incorporated, you can compare the effects of market volatilities on Hormel Foods and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Microchip Technology.
Diversification Opportunities for Hormel Foods and Microchip Technology
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hormel and Microchip is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Hormel Foods i.e., Hormel Foods and Microchip Technology go up and down completely randomly.
Pair Corralation between Hormel Foods and Microchip Technology
Assuming the 90 days trading horizon Hormel Foods is expected to under-perform the Microchip Technology. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.62 times less risky than Microchip Technology. The stock trades about -0.37 of its potential returns per unit of risk. The Microchip Technology Incorporated is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 17,050 in Microchip Technology Incorporated on October 25, 2024 and sell it today you would earn a total of 364.00 from holding Microchip Technology Incorporated or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Microchip Technology Incorpora
Performance |
| Timeline |
| Hormel Foods |
| Microchip Technology |
Hormel Foods and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Microchip Technology
The main advantage of trading using opposite Hormel Foods and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.| Hormel Foods vs. Verizon Communications | Hormel Foods vs. Check Point Software | Hormel Foods vs. Charter Communications | Hormel Foods vs. Unity Software |
| Microchip Technology vs. Monster Beverage | Microchip Technology vs. Verizon Communications | Microchip Technology vs. United Airlines Holdings | Microchip Technology vs. Bemobi Mobile Tech |
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.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |