Correlation Between NORTHEAST UTILITIES and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES 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 NORTHEAST UTILITIES and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Hormel Foods, you can compare the effects of market volatilities on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Hormel Foods.
Diversification Opportunities for NORTHEAST UTILITIES and Hormel Foods
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between NORTHEAST and Hormel is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Hormel Foods go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Hormel Foods
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 1.01 times less return on investment than Hormel Foods. But when comparing it to its historical volatility, NORTHEAST UTILITIES is 1.12 times less risky than Hormel Foods. It trades about 0.04 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,840 in Hormel Foods on September 14, 2024 and sell it today you would earn a total of 358.00 from holding Hormel Foods or generate 12.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Hormel Foods
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Hormel Foods |
NORTHEAST UTILITIES and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Hormel Foods
The main advantage of trading using opposite NORTHEAST UTILITIES and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES 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.| NORTHEAST UTILITIES vs. Micron Technology | NORTHEAST UTILITIES vs. MSAD INSURANCE | NORTHEAST UTILITIES vs. Universal Insurance Holdings | NORTHEAST UTILITIES vs. Amkor Technology |
| Hormel Foods vs. Guidewire Software | Hormel Foods vs. Carsales | Hormel Foods vs. GEELY AUTOMOBILE | Hormel Foods vs. NORTHEAST UTILITIES |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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