Correlation Between Hormel Foods and Kellanova

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

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

Diversification Opportunities for Hormel Foods and Kellanova

0.69

Correlation Coefficient

Hormel Foods  Kellanova

Poor diversification

The 3 months correlation between Hormel and Kellanova is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova 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 Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Hormel Foods i.e., Hormel Foods and Kellanova go up and down completely randomly.

Pair Corralation between Hormel Foods and Kellanova

Assuming the 90 days trading horizon Hormel Foods is expected to generate 1.21 times less return on investment than Kellanova. But when comparing it to its historical volatility, Hormel Foods is 1.11 times less risky than Kellanova. It trades about 0.14 of its potential returns per unit of risk. Kellanova is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  22,320  in Kellanova on October 10, 2024 and sell it today you would earn a total of  2,617  from holding Kellanova or generate 11.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Hormel Foods  vs.  Kellanova

Hormel Foods

Risk-Adjusted Performance

10 of 100

Good

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.

Kellanova

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Kellanova may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hormel Foods and Kellanova

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

The idea behind Hormel Foods and Kellanova 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.

Check out your portfolio center.

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.