Correlation Between Hormel Foods and Block

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

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

Diversification Opportunities for Hormel Foods and Block

0.85

Correlation Coefficient

Hormel Foods  Block

Very poor diversification

The 3 months correlation between Hormel and Block is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block 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 Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of Hormel Foods i.e., Hormel Foods and Block go up and down completely randomly.

Pair Corralation between Hormel Foods and Block

Assuming the 90 days trading horizon Hormel Foods is expected to generate 0.41 times more return on investment than Block. However, Hormel Foods is 2.43 times less risky than Block. It trades about -0.18 of its potential returns per unit of risk. Block Inc is currently generating about -0.13 per unit of risk. If you would invest  19,456  in Hormel Foods on October 11, 2024 and sell it today you would lose (942.00) from holding Hormel Foods or give up 4.84% of portfolio value over 90 days.

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

Hormel Foods  vs.  Block Inc

Hormel Foods

Risk-Adjusted Performance

10 of 100

OK

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 uncertain basic indicators, Hormel Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Block Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Block sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hormel Foods and Block

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

The idea behind Hormel Foods and Block 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.