Correlation Between Hormel Foods and China Mengniu
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and China Mengniu 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 Hormel Foods and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and China Mengniu Dairy, you can compare the effects of market volatilities on Hormel Foods and China Mengniu 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 Hormel Foods with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and China Mengniu.
Diversification Opportunities for Hormel Foods and China Mengniu
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hormel and China is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and China Mengniu Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mengniu Dairy and Hormel 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 Hormel Foods are associated (or correlated) with China Mengniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mengniu Dairy has no effect on the direction of Hormel Foods i.e., Hormel Foods and China Mengniu go up and down completely randomly.
Pair Corralation between Hormel Foods and China Mengniu
Considering the 90-day investment horizon Hormel Foods is expected to generate 0.87 times more return on investment than China Mengniu. However, Hormel Foods is 1.15 times less risky than China Mengniu. It trades about 0.16 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.23 per unit of risk. If you would invest 3,020 in Hormel Foods on January 25, 2024 and sell it today you would earn a total of 540.00 from holding Hormel Foods or generate 17.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Hormel Foods vs. China Mengniu Dairy
Performance |
| Timeline |
| Hormel Foods |
| China Mengniu Dairy |
Hormel Foods and China Mengniu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and China Mengniu
The main advantage of trading using opposite Hormel Foods and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, China Mengniu 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 China Mengniu will offset losses from the drop in China Mengniu's long position.| Hormel Foods vs. Campbell Soup | Hormel Foods vs. General Mills | Hormel Foods vs. Kellanova | Hormel Foods vs. Lamb Weston Holdings |
| China Mengniu vs. Nichirei | China Mengniu vs. Kellanova | China Mengniu vs. Lancaster Colony | China Mengniu vs. The A2 Milk |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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