Correlation Between Hormel Foods and Walmart

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

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

Diversification Opportunities for Hormel Foods and Walmart

0.26

Correlation Coefficient

Hormel Foods  Walmart

Modest diversification

The 3 months correlation between Hormel and Walmart is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Hormel Foods i.e., Hormel Foods and Walmart go up and down completely randomly.

Pair Corralation between Hormel Foods and Walmart

Assuming the 90 days trading horizon Hormel Foods is expected to generate 1.06 times more return on investment than Walmart. However, Hormel Foods is 1.06 times more volatile than Walmart. It trades about -0.11 of its potential returns per unit of risk. Walmart is currently generating about -0.13 per unit of risk. If you would invest  19,773  in Hormel Foods on December 24, 2024 and sell it today you would lose (2,649) from holding Hormel Foods or give up 13.4% of portfolio value over 90 days.

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

Hormel Foods  vs.  Walmart

Hormel Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hormel Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hormel Foods and Walmart

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

The idea behind Hormel Foods and Walmart 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.