Correlation Between Hormel Foods and Carsales
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Carsales 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 Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Carsales, you can compare the effects of market volatilities on Hormel Foods and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Carsales.
Diversification Opportunities for Hormel Foods and Carsales
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hormel and Carsales is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Hormel Foods i.e., Hormel Foods and Carsales go up and down completely randomly.
Pair Corralation between Hormel Foods and Carsales
Assuming the 90 days horizon Hormel Foods is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.04 times less risky than Carsales. The stock trades about -0.02 of its potential returns per unit of risk. The Carsales is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,190 in Carsales on September 14, 2024 and sell it today you would earn a total of 1,150 from holding Carsales or generate 96.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Carsales
Performance |
| Timeline |
| Hormel Foods |
| Carsales |
Hormel Foods and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Carsales
The main advantage of trading using opposite Hormel Foods and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Hormel Foods vs. Guidewire Software | Hormel Foods vs. Carsales | Hormel Foods vs. GEELY AUTOMOBILE | Hormel Foods vs. NORTHEAST UTILITIES |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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