Correlation Between Hormel Foods and JBS SA

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

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

Diversification Opportunities for Hormel Foods and JBS SA

0.58

Correlation Coefficient

Hormel Foods  JBS SA

Very weak diversification

The 3 months correlation between Hormel and JBS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA 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 JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of Hormel Foods i.e., Hormel Foods and JBS SA go up and down completely randomly.

Pair Corralation between Hormel Foods and JBS SA

Considering the 90-day investment horizon Hormel Foods is expected to generate 0.35 times more return on investment than JBS SA. However, Hormel Foods is 2.88 times less risky than JBS SA. It trades about -0.21 of its potential returns per unit of risk. JBS SA is currently generating about -0.12 per unit of risk. If you would invest  3,125  in Hormel Foods on October 24, 2024 and sell it today you would lose (132.00) from holding Hormel Foods or give up 4.22% 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.  JBS SA

Hormel Foods

Risk-Adjusted Performance

0 of 100

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.

JBS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, JBS SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hormel Foods and JBS SA

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

The idea behind Hormel Foods and JBS SA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.