Correlation Between Hormel Foods and ArcelorMittal

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

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

Diversification Opportunities for Hormel Foods and ArcelorMittal

0.52

Correlation Coefficient

Hormel Foods  ArcelorMittal

Very weak diversification

The 3 months correlation between Hormel and ArcelorMittal is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA has no effect on the direction of Hormel Foods i.e., Hormel Foods and ArcelorMittal go up and down completely randomly.

Pair Corralation between Hormel Foods and ArcelorMittal

Assuming the 90 days trading horizon Hormel Foods is expected to generate 0.58 times more return on investment than ArcelorMittal. However, Hormel Foods is 1.72 times less risky than ArcelorMittal. It trades about 0.14 of its potential returns per unit of risk. ArcelorMittal SA is currently generating about 0.0 per unit of risk. If you would invest  16,996  in Hormel Foods on October 9, 2024 and sell it today you would earn a total of  1,666  from holding Hormel Foods or generate 9.8% return on investment over 90 days.

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

Hormel Foods  vs.  ArcelorMittal SA

Hormel Foods

Risk-Adjusted Performance

10 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hormel Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ArcelorMittal SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, ArcelorMittal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hormel Foods and ArcelorMittal

The main advantage of trading using opposite Hormel Foods and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, ArcelorMittal 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 ArcelorMittal will offset losses from the drop in ArcelorMittal's long position.

The idea behind Hormel Foods and ArcelorMittal SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..