Correlation Between Hormel Foods and Nestl SA
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Nestl SA 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 Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Nestl SA, you can compare the effects of market volatilities on Hormel Foods and Nestl SA 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 Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Nestl SA.
Diversification Opportunities for Hormel Foods and Nestl SA
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hormel and Nestl is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA 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 Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of Hormel Foods i.e., Hormel Foods and Nestl SA go up and down completely randomly.
Pair Corralation between Hormel Foods and Nestl SA
Assuming the 90 days horizon Hormel Foods is expected to generate 1.24 times more return on investment than Nestl SA. However, Hormel Foods is 1.24 times more volatile than Nestl SA. It trades about 0.01 of its potential returns per unit of risk. Nestl SA is currently generating about -0.05 per unit of risk. If you would invest 2,799 in Hormel Foods on November 9, 2024 and sell it today you would earn a total of 47.00 from holding Hormel Foods or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Nestl SA
Performance |
| Timeline |
| Hormel Foods |
| Nestl SA |
Hormel Foods and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Nestl SA
The main advantage of trading using opposite Hormel Foods and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Nestl SA 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 Nestl SA will offset losses from the drop in Nestl SA's long position.| Hormel Foods vs. The Hanover Insurance | Hormel Foods vs. OAKTRSPECLENDNEW | Hormel Foods vs. Discover Financial Services | Hormel Foods vs. UNIQA INSURANCE GR |
| Nestl SA vs. Evolution Mining Limited | Nestl SA vs. Calibre Mining Corp | Nestl SA vs. OFFICE DEPOT | Nestl SA vs. Tower One Wireless |
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 CEOs Directory module to screen CEOs from public companies around the world.
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