Correlation Between Hormel Foods and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Prudential 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 Prudential 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 Prudential Financial, you can compare the effects of market volatilities on Hormel Foods and Prudential 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Prudential Financial.
Diversification Opportunities for Hormel Foods and Prudential Financial
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hormel and Prudential is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Hormel Foods i.e., Hormel Foods and Prudential Financial go up and down completely randomly.
Pair Corralation between Hormel Foods and Prudential Financial
Assuming the 90 days trading horizon Hormel Foods is expected to generate 1.41 times more return on investment than Prudential Financial. However, Hormel Foods is 1.41 times more volatile than Prudential Financial. It trades about -0.19 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.41 per unit of risk. If you would invest 19,456 in Hormel Foods on October 12, 2024 and sell it today you would lose (942.00) from holding Hormel Foods or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Prudential Financial
Performance |
| Timeline |
| Hormel Foods |
| Prudential Financial |
Hormel Foods and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Prudential Financial
The main advantage of trading using opposite Hormel Foods and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Prudential 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Hormel Foods vs. Nordon Indstrias Metalrgicas | Hormel Foods vs. Align Technology | Hormel Foods vs. Zebra Technologies | Hormel Foods vs. GP Investments |
| Prudential Financial vs. Paycom Software | Prudential Financial vs. New Oriental Education | Prudential Financial vs. Hormel Foods | Prudential Financial vs. Marfrig Global Foods |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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