Correlation Between Nestlé SA and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Nestlé SA 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 Nestlé SA and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and Hormel Foods, you can compare the effects of market volatilities on Nestlé SA 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 Nestlé SA with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestlé SA and Hormel Foods.
Diversification Opportunities for Nestlé SA and Hormel Foods
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nestlé and Hormel is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Nestlé SA 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 Nestl SA 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 Nestlé SA i.e., Nestlé SA and Hormel Foods go up and down completely randomly.
Pair Corralation between Nestlé SA and Hormel Foods
Assuming the 90 days trading horizon Nestl SA is expected to generate 0.83 times more return on investment than Hormel Foods. However, Nestl SA is 1.2 times less risky than Hormel Foods. It trades about -0.07 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.17 per unit of risk. If you would invest 7,960 in Nestl SA on October 21, 2024 and sell it today you would lose (100.00) from holding Nestl SA or give up 1.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestl SA vs. Hormel Foods
Performance |
| Timeline |
| Nestlé SA |
| Hormel Foods |
Nestlé SA and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestlé SA and Hormel Foods
The main advantage of trading using opposite Nestlé SA and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestlé SA 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.| Nestlé SA vs. Kraft Heinz Co | Nestlé SA vs. General Mills | Nestlé SA vs. General Mills | Nestlé SA vs. Danone SA |
| Hormel Foods vs. Siemens Healthineers AG | Hormel Foods vs. Suntory Beverage Food | Hormel Foods vs. HEALTHSTREAM | Hormel Foods vs. SAN MIGUEL BREWERY |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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