Correlation Between Warner Music and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both Warner Music 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 Warner Music and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Warner Music Group and Hormel Foods, you can compare the effects of market volatilities on Warner Music 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 Warner Music with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Hormel Foods.
Diversification Opportunities for Warner Music and Hormel Foods
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and Hormel is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Warner Music 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 Warner Music Group 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 Warner Music i.e., Warner Music and Hormel Foods go up and down completely randomly.
Pair Corralation between Warner Music and Hormel Foods
Assuming the 90 days trading horizon Warner Music Group is expected to generate 1.4 times more return on investment than Hormel Foods. However, Warner Music is 1.4 times more volatile 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 4,780 in Warner Music Group on November 4, 2024 and sell it today you would lose (162.00) from holding Warner Music Group or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Warner Music Group vs. Hormel Foods
Performance |
| Timeline |
| Warner Music Group |
| Hormel Foods |
Warner Music and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Hormel Foods
The main advantage of trading using opposite Warner Music and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music 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.| Warner Music vs. Multilaser Industrial SA | Warner Music vs. Beyond Meat | Warner Music vs. Tyson Foods | Warner Music vs. Chunghwa Telecom Co, |
| Hormel Foods vs. British American Tobacco | Hormel Foods vs. Nordon Indstrias Metalrgicas | Hormel Foods vs. Marfrig Global Foods | Hormel Foods vs. Burlington Stores, |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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