Correlation Between Bellring Brands and Hormel Foods

Can any of the company-specific risk be diversified away by investing in both Bellring Brands 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 Bellring Brands and Hormel Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bellring Brands LLC and Hormel Foods, you can compare the effects of market volatilities on Bellring Brands 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 Bellring Brands with a short position of Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bellring Brands and Hormel Foods.

Diversification Opportunities for Bellring Brands and Hormel Foods

0.03

Correlation Coefficient

Bellring Brands  Hormel Foods

Significant diversification

The 3 months correlation between Bellring and Hormel is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bellring Brands LLC and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Bellring Brands 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 Bellring Brands LLC 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 Bellring Brands i.e., Bellring Brands and Hormel Foods go up and down completely randomly.

Pair Corralation between Bellring Brands and Hormel Foods

Given the investment horizon of 90 days Bellring Brands LLC is expected to under-perform the Hormel Foods. In addition to that, Bellring Brands is 1.75 times more volatile than Hormel Foods. It trades about -0.06 of its total potential returns per unit of risk. Hormel Foods is currently generating about 0.1 per unit of volatility. If you would invest  3,391  in Hormel Foods on February 5, 2024 and sell it today you would earn a total of  126.00  from holding Hormel Foods or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bellring Brands LLC  vs.  Hormel Foods

Bellring Brands LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bellring Brands LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Bellring Brands is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Hormel Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Hormel Foods disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bellring Brands and Hormel Foods

The main advantage of trading using opposite Bellring Brands and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellring Brands 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.

The idea behind Bellring Brands LLC and Hormel Foods 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.