Correlation Between WH Group and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both WH Group 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 WH Group and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WH Group Ltd and Hormel Foods, you can compare the effects of market volatilities on WH Group 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 WH Group with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of WH Group and Hormel Foods.
Diversification Opportunities for WH Group and Hormel Foods
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WHGLY and Hormel is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding WH Group Ltd and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and WH Group 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 WH Group Ltd 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 WH Group i.e., WH Group and Hormel Foods go up and down completely randomly.
Pair Corralation between WH Group and Hormel Foods
Assuming the 90 days horizon WH Group Ltd is expected to generate 2.25 times more return on investment than Hormel Foods. However, WH Group is 2.25 times more volatile than Hormel Foods. It trades about 0.28 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.16 per unit of risk. If you would invest 1,309 in WH Group Ltd on January 24, 2024 and sell it today you would earn a total of 183.00 from holding WH Group Ltd or generate 13.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
WH Group Ltd vs. Hormel Foods
Performance |
| Timeline |
| WH Group |
| Hormel Foods |
WH Group and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WH Group and Hormel Foods
The main advantage of trading using opposite WH Group and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WH Group 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.| WH Group vs. Kellanova | WH Group vs. Lancaster Colony | WH Group vs. The A2 Milk | WH Group vs. Artisan Consumer Goods |
| Hormel Foods vs. Bunge Limited | Hormel Foods vs. Archer Daniels Midland | Hormel Foods vs. Fresh Del Monte | Hormel Foods vs. Limoneira Co |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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