Correlation Between Hormel Foods and Texas Instruments

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

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

Diversification Opportunities for Hormel Foods and Texas Instruments

0.31

Correlation Coefficient

Hormel Foods  Texas Instruments

Weak diversification

The 3 months correlation between Hormel and Texas is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Texas Instruments Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Instruments 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 Texas Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Instruments has no effect on the direction of Hormel Foods i.e., Hormel Foods and Texas Instruments go up and down completely randomly.

Pair Corralation between Hormel Foods and Texas Instruments

Assuming the 90 days trading horizon Hormel Foods is expected to generate 1.99 times less return on investment than Texas Instruments. But when comparing it to its historical volatility, Hormel Foods is 1.17 times less risky than Texas Instruments. It trades about 0.06 of its potential returns per unit of risk. Texas Instruments Incorporated is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,295  in Texas Instruments Incorporated on October 9, 2024 and sell it today you would earn a total of  2,516  from holding Texas Instruments Incorporated or generate 47.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Hormel Foods  vs.  Texas Instruments Incorporated

Hormel Foods

Risk-Adjusted Performance

10 of 100

Solid

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.

Texas Instruments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Instruments Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Texas Instruments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hormel Foods and Texas Instruments

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

The idea behind Hormel Foods and Texas Instruments Incorporated 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.