Correlation Between Hormel Foods and Mondelez International

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

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

Diversification Opportunities for Hormel Foods and Mondelez International

0.5

Correlation Coefficient

Hormel Foods  Mondelez International

Very weak diversification

The 3 months correlation between Hormel and Mondelez is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and Mondelez International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondelez International 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 Mondelez International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondelez International has no effect on the direction of Hormel Foods i.e., Hormel Foods and Mondelez International go up and down completely randomly.

Pair Corralation between Hormel Foods and Mondelez International

Considering the 90-day investment horizon Hormel Foods is expected to under-perform the Mondelez International. In addition to that, Hormel Foods is 1.41 times more volatile than Mondelez International. It trades about -0.03 of its total potential returns per unit of risk. Mondelez International is currently generating about 0.01 per unit of volatility. If you would invest  6,332  in Mondelez International on September 5, 2024 and sell it today you would lose (5.00) from holding Mondelez International or give up 0.08% 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.  Mondelez International

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.

Mondelez International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hormel Foods and Mondelez International

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

The idea behind Hormel Foods and Mondelez International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..