Correlation Between Hormel Foods and Nestle SA
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Nestle SA 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 Nestle SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Nestle SA, you can compare the effects of market volatilities on Hormel Foods and Nestle SA 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 Nestle SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Nestle SA.
Diversification Opportunities for Hormel Foods and Nestle SA
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hormel and Nestle is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA 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 Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA has no effect on the direction of Hormel Foods i.e., Hormel Foods and Nestle SA go up and down completely randomly.
Pair Corralation between Hormel Foods and Nestle SA
Considering the 90-day investment horizon Hormel Foods is expected to under-perform the Nestle SA. In addition to that, Hormel Foods is 1.11 times more volatile than Nestle SA. It trades about -0.04 of its total potential returns per unit of risk. Nestle SA is currently generating about -0.02 per unit of volatility. If you would invest 12,404 in Nestle SA on January 21, 2024 and sell it today you would lose (1,943) from holding Nestle SA or give up 15.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hormel Foods vs. Nestle SA
Performance |
| Timeline |
| Hormel Foods |
| Nestle SA |
Hormel Foods and Nestle SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hormel Foods and Nestle SA
The main advantage of trading using opposite Hormel Foods and Nestle SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Nestle SA 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 Nestle SA will offset losses from the drop in Nestle SA's long position.| Hormel Foods vs. Green Globe International | Hormel Foods vs. Greenlane Holdings | Hormel Foods vs. 22nd Century Group | Hormel Foods vs. 1606 Corp |
| Nestle SA vs. Kellanova | Nestle SA vs. Lancaster Colony | Nestle SA vs. The A2 Milk | Nestle SA vs. Artisan Consumer Goods |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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