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 ADR, 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
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hormel and BRF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR 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 ADR 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
Considering the 90-day investment horizon Hormel Foods is expected to under-perform the BRF SA. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 2.07 times less risky than BRF SA. The stock trades about -0.04 of its potential returns per unit of risk. The BRF SA ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 133.00 in BRF SA ADR on November 2, 2024 and sell it today you would earn a total of 242.00 from holding BRF SA ADR or generate 181.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hormel Foods vs. BRF SA ADR
Performance |
| Timeline |
| Hormel Foods |
| BRF SA ADR |
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. Campbell Soup | Hormel Foods vs. General Mills | Hormel Foods vs. Kellanova | Hormel Foods vs. Lamb Weston Holdings |
| BRF SA vs. Marfrig Global Foods | BRF SA vs. Pilgrims Pride Corp | BRF SA vs. John B Sanfilippo | BRF SA vs. Seneca Foods 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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