Correlation Between Grand Havana and Hormel Foods

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

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

Diversification Opportunities for Grand Havana and Hormel Foods

-0.24

Correlation Coefficient

Grand Havana  Hormel Foods

Very good diversification

The 3 months correlation between Grand and Hormel is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Grand Havana and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Grand Havana 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 Grand Havana 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 Grand Havana i.e., Grand Havana and Hormel Foods go up and down completely randomly.

Pair Corralation between Grand Havana and Hormel Foods

Given the investment horizon of 90 days Grand Havana is expected to generate 7.58 times more return on investment than Hormel Foods. However, Grand Havana is 7.58 times more volatile than Hormel Foods. It trades about 0.02 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.1 per unit of risk. If you would invest  0.08  in Grand Havana on September 12, 2024 and sell it today you would lose (0.01) from holding Grand Havana or give up 12.5% of portfolio value over 90 days.

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

Grand Havana  vs.  Hormel Foods

Grand Havana

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Havana are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Grand Havana may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Grand Havana and Hormel Foods

The main advantage of trading using opposite Grand Havana and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Havana 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 Grand Havana 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.