Correlation Between Fresh Del and Hormel Foods

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

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

Diversification Opportunities for Fresh Del and Hormel Foods

0.82

Correlation Coefficient

Fresh Del  Hormel Foods

Very poor diversification

The 3 months correlation between Fresh and Hormel is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Fresh Del 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 Fresh Del Monte 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 Fresh Del i.e., Fresh Del and Hormel Foods go up and down completely randomly.

Pair Corralation between Fresh Del and Hormel Foods

Considering the 90-day investment horizon Fresh Del Monte is expected to under-perform the Hormel Foods. But the stock apears to be less risky and, when comparing its historical volatility, Fresh Del Monte is 1.16 times less risky than Hormel Foods. The stock trades about -0.12 of its potential returns per unit of risk. The Hormel Foods is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,154  in Hormel Foods on December 27, 2024 and sell it today you would lose (196.00) from holding Hormel Foods or give up 6.21% of portfolio value over 90 days.

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

Fresh Del Monte  vs.  Hormel Foods

Fresh Del Monte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fresh Del Monte has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail 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 quite persistent basic indicators, Hormel Foods is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Fresh Del and Hormel Foods

The main advantage of trading using opposite Fresh Del and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del 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 Fresh Del Monte 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.