Correlation Between Hormel Foods and Warner Music
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Warner Music 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 Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Warner Music Group, you can compare the effects of market volatilities on Hormel Foods and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Warner Music.
Diversification Opportunities for Hormel Foods and Warner Music
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hormel and Warner is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Hormel Foods i.e., Hormel Foods and Warner Music go up and down completely randomly.
Pair Corralation between Hormel Foods and Warner Music
Assuming the 90 days trading horizon Hormel Foods is expected to under-perform the Warner Music. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.4 times less risky than Warner Music. The stock trades about -0.17 of its potential returns per unit of risk. The Warner Music Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 4,780 in Warner Music Group on November 4, 2024 and sell it today you would lose (162.00) from holding Warner Music Group or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Hormel Foods vs. Warner Music Group
Performance |
| Timeline |
| Hormel Foods |
| Warner Music Group |
Hormel Foods and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Warner Music
The main advantage of trading using opposite Hormel Foods and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Hormel Foods vs. British American Tobacco | Hormel Foods vs. Nordon Indstrias Metalrgicas | Hormel Foods vs. Marfrig Global Foods | Hormel Foods vs. Burlington Stores, |
| Warner Music vs. Multilaser Industrial SA | Warner Music vs. Beyond Meat | Warner Music vs. Tyson Foods | Warner Music vs. Chunghwa Telecom Co, |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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