Correlation Between Hormel Foods and Central Garden
Can any of the company-specific risk be diversified away by investing in both Hormel Foods and Central Garden 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 Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and Central Garden Pet, you can compare the effects of market volatilities on Hormel Foods and Central Garden 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 Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and Central Garden.
Diversification Opportunities for Hormel Foods and Central Garden
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hormel and Central is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet 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 Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Hormel Foods i.e., Hormel Foods and Central Garden go up and down completely randomly.
Pair Corralation between Hormel Foods and Central Garden
Considering the 90-day investment horizon Hormel Foods is expected to generate 1.69 times less return on investment than Central Garden. But when comparing it to its historical volatility, Hormel Foods is 1.57 times less risky than Central Garden. It trades about 0.04 of its potential returns per unit of risk. Central Garden Pet is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,090 in Central Garden Pet on February 2, 2024 and sell it today you would earn a total of 54.00 from holding Central Garden Pet or generate 1.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Hormel Foods vs. Central Garden Pet
Performance |
Timeline |
Hormel Foods |
Central Garden Pet |
Hormel Foods and Central Garden Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hormel Foods and Central Garden
The main advantage of trading using opposite Hormel Foods and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, Central Garden 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 Central Garden will offset losses from the drop in Central Garden's long position.Hormel Foods vs. Central Garden Pet | Hormel Foods vs. Central Garden Pet | Hormel Foods vs. Natures Sunshine Products | Hormel Foods vs. Associated British Foods |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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