Correlation Between Treehouse Foods and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Treehouse Foods 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 Treehouse Foods and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Treehouse Foods and Hormel Foods, you can compare the effects of market volatilities on Treehouse Foods 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 Treehouse Foods with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treehouse Foods and Hormel Foods.
Diversification Opportunities for Treehouse Foods and Hormel Foods
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Treehouse and Hormel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Treehouse Foods 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 Treehouse Foods 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 Treehouse Foods i.e., Treehouse Foods and Hormel Foods go up and down completely randomly.
Pair Corralation between Treehouse Foods and Hormel Foods
Considering the 90-day investment horizon Treehouse Foods is expected to under-perform the Hormel Foods. In addition to that, Treehouse Foods is 2.87 times more volatile than Hormel Foods. It trades about -0.06 of its total potential returns per unit of risk. Hormel Foods is currently generating about 0.06 per unit of volatility. If you would invest 3,094 in Hormel Foods on August 28, 2024 and sell it today you would earn a total of 49.00 from holding Hormel Foods or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Treehouse Foods vs. Hormel Foods
Performance |
| Timeline |
| Treehouse Foods |
| Hormel Foods |
Treehouse Foods and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Treehouse Foods and Hormel Foods
The main advantage of trading using opposite Treehouse Foods and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treehouse Foods 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.| Treehouse Foods vs. Bellring Brands LLC | Treehouse Foods vs. Ingredion Incorporated | Treehouse Foods vs. Nomad Foods | Treehouse Foods vs. Simply Good Foods |
| Hormel Foods vs. Bellring Brands LLC | Hormel Foods vs. Ingredion Incorporated | Hormel Foods vs. Nomad Foods | Hormel Foods vs. Simply Good Foods |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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