Correlation Between Farmmi and Hormel Foods

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

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

Diversification Opportunities for Farmmi and Hormel Foods

-0.86

Correlation Coefficient

Farmmi  Hormel Foods

Pay attention - limited upside

The 3 months correlation between Farmmi and Hormel is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Farmmi 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 Farmmi Inc 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 Farmmi i.e., Farmmi and Hormel Foods go up and down completely randomly.

Pair Corralation between Farmmi and Hormel Foods

Given the investment horizon of 90 days Farmmi Inc is expected to under-perform the Hormel Foods. In addition to that, Farmmi is 3.2 times more volatile than Hormel Foods. It trades about -0.1 of its total potential returns per unit of risk. Hormel Foods is currently generating about -0.04 per unit of volatility. If you would invest  5,045  in Hormel Foods on February 4, 2024 and sell it today you would lose (1,528) from holding Hormel Foods or give up 30.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Farmmi Inc  vs.  Hormel Foods

Farmmi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmmi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 uncertain basic indicators, Hormel Foods disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmmi and Hormel Foods

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

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.