Correlation Between Lamb Weston and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Lamb Weston 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 Lamb Weston and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamb Weston Holdings and Hormel Foods, you can compare the effects of market volatilities on Lamb Weston 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 Lamb Weston with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Hormel Foods.
Diversification Opportunities for Lamb Weston and Hormel Foods
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lamb and Hormel is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Lamb Weston 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 Lamb Weston Holdings 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 Lamb Weston i.e., Lamb Weston and Hormel Foods go up and down completely randomly.
Pair Corralation between Lamb Weston and Hormel Foods
Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 1.48 times more return on investment than Hormel Foods. However, Lamb Weston is 1.48 times more volatile than Hormel Foods. It trades about -0.04 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.17 per unit of risk. If you would invest 5,972 in Lamb Weston Holdings on November 18, 2024 and sell it today you would lose (126.00) from holding Lamb Weston Holdings or give up 2.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamb Weston Holdings vs. Hormel Foods
Performance |
| Timeline |
| Lamb Weston Holdings |
| Hormel Foods |
Lamb Weston and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and Hormel Foods
The main advantage of trading using opposite Lamb Weston and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston 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.| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA Holdings |
| Hormel Foods vs. Campbell Soup | Hormel Foods vs. General Mills | Hormel Foods vs. Kellanova | Hormel Foods vs. Lamb Weston Holdings |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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