Correlation Between Blue Star and Hormel Foods

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

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

Diversification Opportunities for Blue Star and Hormel Foods

0.25

Correlation Coefficient

Blue Star  Hormel Foods

Modest diversification

The 3 months correlation between Blue and Hormel is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Foods and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Blue Star 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 Blue Star Foods 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 Blue Star i.e., Blue Star and Hormel Foods go up and down completely randomly.

Pair Corralation between Blue Star and Hormel Foods

Given the investment horizon of 90 days Blue Star Foods is expected to under-perform the Hormel Foods. In addition to that, Blue Star is 6.89 times more volatile than Hormel Foods. It trades about -0.09 of its total potential returns per unit of risk. Hormel Foods is currently generating about -0.02 per unit of volatility. If you would invest  4,261  in Hormel Foods on September 12, 2024 and sell it today you would lose (906.00) from holding Hormel Foods or give up 21.26% of portfolio value over 90 days.

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

Blue Star Foods  vs.  Hormel Foods

Blue Star Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hormel Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Hormel Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blue Star and Hormel Foods

The main advantage of trading using opposite Blue Star and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Star 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 Blue Star Foods 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.