Correlation Between J J and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both J J and Hormel Foods 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 J J and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between J J Snack and Hormel Foods, you can compare the effects of market volatilities on J J and Hormel Foods 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 J J with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of J J and Hormel Foods.
Diversification Opportunities for J J and Hormel Foods
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between JJSF and Hormel is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding J J Snack and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and J J 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 J J Snack are associated (or correlated) with Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of J J i.e., J J and Hormel Foods go up and down completely randomly.
Pair Corralation between J J and Hormel Foods
Given the investment horizon of 90 days J J Snack is expected to under-perform the Hormel Foods. But the stock apears to be less risky and, when comparing its historical volatility, J J Snack is 1.37 times less risky than Hormel Foods. The stock trades about -0.01 of its potential returns per unit of risk. The Hormel Foods is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,863 in Hormel Foods on December 30, 2024 and sell it today you would earn a total of 173.00 from holding Hormel Foods or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
J J Snack vs. Hormel Foods
Performance |
| Timeline |
| J J Snack |
| Hormel Foods |
J J and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with J J and Hormel Foods
The main advantage of trading using opposite J J and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J J position performs unexpectedly, Hormel Foods 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 Hormel Foods will offset losses from the drop in Hormel Foods' long position.The idea behind J J Snack and Hormel Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Hormel Foods vs. Campbell Soup | ||
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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