Correlation Between Hormel Foods and COFCO Joycome

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

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

Diversification Opportunities for Hormel Foods and COFCO Joycome

-0.4

Correlation Coefficient

Hormel Foods  COFCO Joycome

Very good diversification

The 3 months correlation between Hormel and COFCO is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and COFCO Joycome Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFCO Joycome 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 COFCO Joycome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFCO Joycome Foods has no effect on the direction of Hormel Foods i.e., Hormel Foods and COFCO Joycome go up and down completely randomly.

Pair Corralation between Hormel Foods and COFCO Joycome

Assuming the 90 days horizon Hormel Foods is expected to under-perform the COFCO Joycome. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.82 times less risky than COFCO Joycome. The stock trades about -0.12 of its potential returns per unit of risk. The COFCO Joycome Foods is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17.00  in COFCO Joycome Foods on December 28, 2024 and sell it today you would earn a total of  1.00  from holding COFCO Joycome Foods or generate 5.88% return on investment over 90 days.

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

Hormel Foods  vs.  COFCO Joycome Foods

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

COFCO Joycome Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COFCO Joycome Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COFCO Joycome may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hormel Foods and COFCO Joycome

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

The idea behind Hormel Foods and COFCO Joycome 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.