Correlation Between NVIDIA and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both NVIDIA 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 NVIDIA and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NVIDIA and Hormel Foods, you can compare the effects of market volatilities on NVIDIA 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 NVIDIA with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVIDIA and Hormel Foods.
Diversification Opportunities for NVIDIA and Hormel Foods
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NVIDIA and Hormel is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Hormel Foods go up and down completely randomly.
Pair Corralation between NVIDIA and Hormel Foods
Given the investment horizon of 90 days NVIDIA is expected to generate 2.13 times more return on investment than Hormel Foods. However, NVIDIA is 2.13 times more volatile than Hormel Foods. It trades about 0.15 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.04 per unit of risk. If you would invest 1,598 in NVIDIA on August 27, 2024 and sell it today you would earn a total of 12,597 from holding NVIDIA or generate 788.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NVIDIA vs. Hormel Foods
Performance |
| Timeline |
| NVIDIA |
| Hormel Foods |
NVIDIA and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVIDIA and Hormel Foods
The main advantage of trading using opposite NVIDIA and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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.| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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