Correlation Between Apple and Hormel Foods

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

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

Diversification Opportunities for Apple and Hormel Foods

0.63

Correlation Coefficient

Apple  Hormel Foods

Poor diversification

The 3 months correlation between Apple and Hormel is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Apple 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 Apple 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 Apple i.e., Apple and Hormel Foods go up and down completely randomly.

Pair Corralation between Apple and Hormel Foods

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the Hormel Foods. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.05 times less risky than Hormel Foods. The stock trades about -0.19 of its potential returns per unit of risk. The Hormel Foods is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  19,773  in Hormel Foods on December 25, 2024 and sell it today you would lose (3,198) from holding Hormel Foods or give up 16.17% of portfolio value over 90 days.

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

Apple Inc  vs.  Hormel Foods

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple 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 basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hormel Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hormel Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Apple and Hormel Foods

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

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.