Correlation Between Hormel Foods and Kellanova
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Kellanova 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 Kellanova into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Kellanova, you can compare the effects of market volatilities on Hormel Foods and Kellanova 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 Kellanova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Kellanova.
Diversification Opportunities for Hormel Foods and Kellanova
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hormel and Kellanova is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova 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 Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Hormel Foods i.e., Hormel Foods and Kellanova go up and down completely randomly.
Pair Corralation between Hormel Foods and Kellanova
Considering the 90-day investment horizon Hormel Foods is expected to under-perform the Kellanova. In addition to that, Hormel Foods is 1.23 times more volatile than Kellanova. It trades about -0.03 of its total potential returns per unit of risk. Kellanova is currently generating about -0.01 per unit of volatility. If you would invest 6,340 in Kellanova on January 25, 2024 and sell it today you would lose (526.00) from holding Kellanova or give up 8.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hormel Foods vs. Kellanova
Performance |
| Timeline |
| Hormel Foods |
| Kellanova |
Hormel Foods and Kellanova Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Kellanova
The main advantage of trading using opposite Hormel Foods and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Kellanova 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 Kellanova will offset losses from the drop in Kellanova's long position.The idea behind Hormel Foods and Kellanova pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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