Correlation Between Hormel Foods and EBay

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

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

Diversification Opportunities for Hormel Foods and EBay

0.73

Correlation Coefficient

Hormel Foods  EBay

Poor diversification

The 3 months correlation between Hormel and EBay is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Hormel Foods i.e., Hormel Foods and EBay go up and down completely randomly.

Pair Corralation between Hormel Foods and EBay

Assuming the 90 days trading horizon Hormel Foods is expected to under-perform the EBay. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.93 times less risky than EBay. The stock trades about -0.16 of its potential returns per unit of risk. The eBay Inc is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  20,010  in eBay Inc on October 10, 2024 and sell it today you would lose (806.00) from holding eBay Inc or give up 4.03% of portfolio value over 90 days.

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

Hormel Foods  vs.  eBay Inc

Hormel Foods

Risk-Adjusted Performance

11 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 11 (%) 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.

eBay Inc

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hormel Foods and EBay

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

The idea behind Hormel Foods and eBay Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.