Correlation Between JM Smucker and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both JM Smucker 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 JM Smucker and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JM Smucker and Hormel Foods, you can compare the effects of market volatilities on JM Smucker 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 JM Smucker with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of JM Smucker and Hormel Foods.
Diversification Opportunities for JM Smucker and Hormel Foods
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SJM and Hormel is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and JM Smucker 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 JM Smucker 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 JM Smucker i.e., JM Smucker and Hormel Foods go up and down completely randomly.
Pair Corralation between JM Smucker and Hormel Foods
Considering the 90-day investment horizon JM Smucker is expected to generate 10.45 times less return on investment than Hormel Foods. But when comparing it to its historical volatility, JM Smucker is 1.41 times less risky than Hormel Foods. It trades about 0.01 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,044 in Hormel Foods on January 19, 2024 and sell it today you would earn a total of 366.00 from holding Hormel Foods or generate 12.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JM Smucker vs. Hormel Foods
Performance |
| Timeline |
| JM Smucker |
| Hormel Foods |
JM Smucker and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JM Smucker and Hormel Foods
The main advantage of trading using opposite JM Smucker and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker 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.| JM Smucker vs. Central Garden Pet | JM Smucker vs. Central Garden Pet | JM Smucker vs. The A2 Milk | JM Smucker vs. Altavoz Entertainment |
| Hormel Foods vs. Central Garden Pet | Hormel Foods vs. Central Garden Pet | Hormel Foods vs. The A2 Milk | Hormel Foods vs. Altavoz Entertainment |
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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