Correlation Between Hormel Foods and BRF SA
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and BRF 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 BRF 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 BRF SA, you can compare the effects of market volatilities on Hormel Foods and BRF 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 BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and BRF SA.
Diversification Opportunities for Hormel Foods and BRF SA
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hormel and BRF is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and BRF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF 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 BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA has no effect on the direction of Hormel Foods i.e., Hormel Foods and BRF SA go up and down completely randomly.
Pair Corralation between Hormel Foods and BRF SA
Assuming the 90 days horizon Hormel Foods is expected to generate 0.43 times more return on investment than BRF SA. However, Hormel Foods is 2.3 times less risky than BRF SA. It trades about -0.37 of its potential returns per unit of risk. BRF SA is currently generating about -0.43 per unit of risk. If you would invest 3,198 in Hormel Foods on October 12, 2024 and sell it today you would lose (226.00) from holding Hormel Foods or give up 7.07% 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. BRF SA
Performance |
| Timeline |
| Hormel Foods |
| BRF SA |
Hormel Foods and BRF SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and BRF SA
The main advantage of trading using opposite Hormel Foods and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, BRF 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 BRF SA will offset losses from the drop in BRF SA's long position.| Hormel Foods vs. alstria office REIT AG | Hormel Foods vs. Haverty Furniture Companies | Hormel Foods vs. KENEDIX OFFICE INV | Hormel Foods vs. Cairo Communication SpA |
| BRF SA vs. Thai Beverage Public | BRF SA vs. National Beverage Corp | BRF SA vs. Austevoll Seafood ASA | BRF SA vs. Apollo Investment Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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