Correlation Between Micron Technology and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Micron Technology 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 Micron Technology and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Hormel Foods, you can compare the effects of market volatilities on Micron Technology 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 Micron Technology with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Hormel Foods.
Diversification Opportunities for Micron Technology and Hormel Foods
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Micron and Hormel is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and Hormel Foods go up and down completely randomly.
Pair Corralation between Micron Technology and Hormel Foods
Assuming the 90 days trading horizon Micron Technology is expected to generate 2.15 times more return on investment than Hormel Foods. However, Micron Technology is 2.15 times more volatile than Hormel Foods. It trades about 0.06 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.02 per unit of risk. If you would invest 5,041 in Micron Technology on October 11, 2024 and sell it today you would earn a total of 5,482 from holding Micron Technology or generate 108.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.79% |
| Values | Daily Returns |
Micron Technology vs. Hormel Foods
Performance |
| Timeline |
| Micron Technology |
| Hormel Foods |
Micron Technology and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and Hormel Foods
The main advantage of trading using opposite Micron Technology and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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.| Micron Technology vs. Costco Wholesale | Micron Technology vs. Datadog, | Micron Technology vs. United Airlines Holdings | Micron Technology vs. Deutsche Bank Aktiengesellschaft |
| Hormel Foods vs. Nordon Indstrias Metalrgicas | Hormel Foods vs. Align Technology | Hormel Foods vs. Zebra Technologies | Hormel Foods vs. GP Investments |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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