Correlation Between Hormel Foods and Alibaba Group

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

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

Diversification Opportunities for Hormel Foods and Alibaba Group

-0.8

Correlation Coefficient

Hormel Foods  Alibaba Group

Pay attention - limited upside

The 3 months correlation between Hormel and Alibaba is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Hormel Foods i.e., Hormel Foods and Alibaba Group go up and down completely randomly.

Pair Corralation between Hormel Foods and Alibaba Group

Assuming the 90 days trading horizon Hormel Foods is expected to under-perform the Alibaba Group. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.66 times less risky than Alibaba Group. The stock trades about -0.14 of its potential returns per unit of risk. The Alibaba Group Holding is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,904  in Alibaba Group Holding on December 25, 2024 and sell it today you would earn a total of  790.00  from holding Alibaba Group Holding or generate 41.49% return on investment over 90 days.

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

Hormel Foods  vs.  Alibaba Group Holding

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.

Alibaba Group Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Alibaba Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hormel Foods and Alibaba Group

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

The idea behind Hormel Foods and Alibaba Group Holding 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.