Correlation Between Hormel Foods and Bridgford Foods

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

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

Diversification Opportunities for Hormel Foods and Bridgford Foods

0.45

Correlation Coefficient

Hormel Foods  Bridgford Foods

Very weak diversification

The 3 months correlation between Hormel and Bridgford is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford 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 Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of Hormel Foods i.e., Hormel Foods and Bridgford Foods go up and down completely randomly.

Pair Corralation between Hormel Foods and Bridgford Foods

Considering the 90-day investment horizon Hormel Foods is expected to under-perform the Bridgford Foods. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 1.1 times less risky than Bridgford Foods. The stock trades about -0.05 of its potential returns per unit of risk. The Bridgford Foods is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,040  in Bridgford Foods on December 21, 2024 and sell it today you would lose (41.00) from holding Bridgford Foods or give up 3.94% of portfolio value over 90 days.

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

Hormel Foods  vs.  Bridgford 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 quite persistent basic indicators, Hormel Foods is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Bridgford Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bridgford Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Bridgford Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hormel Foods and Bridgford Foods

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

The idea behind Hormel Foods and Bridgford 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.