Correlation Between Hormel Foods and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Monster Beverage 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 Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Monster Beverage, you can compare the effects of market volatilities on Hormel Foods and Monster Beverage 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 Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Monster Beverage.
Diversification Opportunities for Hormel Foods and Monster Beverage
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hormel and Monster is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage 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 Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage has no effect on the direction of Hormel Foods i.e., Hormel Foods and Monster Beverage go up and down completely randomly.
Pair Corralation between Hormel Foods and Monster Beverage
Assuming the 90 days trading horizon Hormel Foods is expected to under-perform the Monster Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.23 times less risky than Monster Beverage. The stock trades about -0.18 of its potential returns per unit of risk. The Monster Beverage is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 3,992 in Monster Beverage on October 11, 2024 and sell it today you would lose (45.00) from holding Monster Beverage or give up 1.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Monster Beverage
Performance |
| Timeline |
| Hormel Foods |
| Monster Beverage |
Hormel Foods and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Monster Beverage
The main advantage of trading using opposite Hormel Foods and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Monster Beverage 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 Monster Beverage will offset losses from the drop in Monster Beverage's long position.| Hormel Foods vs. Nordon Indstrias Metalrgicas | Hormel Foods vs. Align Technology | Hormel Foods vs. Zebra Technologies | Hormel Foods vs. GP Investments |
| Monster Beverage vs. Citizens Financial Group, | Monster Beverage vs. Ameriprise Financial | Monster Beverage vs. Broadridge Financial Solutions, | Monster Beverage vs. Discover Financial Services |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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