Correlation Between Hormel Foods and METISA Metalrgica

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

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

Diversification Opportunities for Hormel Foods and METISA Metalrgica

0.01

Correlation Coefficient

Hormel Foods  METISA Metalrgica

Significant diversification

The 3 months correlation between Hormel and METISA is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and METISA Metalrgica Timboense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METISA Metalrgica 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 METISA Metalrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METISA Metalrgica has no effect on the direction of Hormel Foods i.e., Hormel Foods and METISA Metalrgica go up and down completely randomly.

Pair Corralation between Hormel Foods and METISA Metalrgica

Assuming the 90 days trading horizon Hormel Foods is expected to generate 0.39 times more return on investment than METISA Metalrgica. However, Hormel Foods is 2.6 times less risky than METISA Metalrgica. It trades about 0.27 of its potential returns per unit of risk. METISA Metalrgica Timboense is currently generating about 0.05 per unit of risk. If you would invest  16,996  in Hormel Foods on October 6, 2024 and sell it today you would earn a total of  2,704  from holding Hormel Foods or generate 15.91% return on investment over 90 days.

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

Hormel Foods  vs.  METISA Metalrgica Timboense

Hormel Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hormel Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

METISA Metalrgica

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Hormel Foods and METISA Metalrgica

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

The idea behind Hormel Foods and METISA Metalrgica Timboense 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..