Correlation Between Hormel Foods and United Natural

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

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

Diversification Opportunities for Hormel Foods and United Natural

0.93

Correlation Coefficient

Hormel Foods  United Natural

Almost no diversification

The 3 months correlation between Hormel and United is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and United Natural Foods, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods, 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods, has no effect on the direction of Hormel Foods i.e., Hormel Foods and United Natural go up and down completely randomly.

Pair Corralation between Hormel Foods and United Natural

Assuming the 90 days trading horizon Hormel Foods is expected to generate 3.23 times less return on investment than United Natural. But when comparing it to its historical volatility, Hormel Foods is 4.6 times less risky than United Natural. It trades about 0.27 of its potential returns per unit of risk. United Natural Foods, is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,695  in United Natural Foods, on October 4, 2024 and sell it today you would earn a total of  1,458  from holding United Natural Foods, or generate 54.1% return on investment over 90 days.

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

Hormel Foods  vs.  United Natural Foods,

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.

United Natural Foods,

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods, are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Natural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hormel Foods and United Natural

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

The idea behind Hormel Foods and United Natural Foods, 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.