Correlation Between Hormel Foods and Nuzee

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

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

Diversification Opportunities for Hormel Foods and Nuzee

0.4

Correlation Coefficient

Hormel Foods  Nuzee

Very weak diversification

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

Pair Corralation between Hormel Foods and Nuzee

Considering the 90-day investment horizon Hormel Foods is expected to under-perform the Nuzee. But the stock apears to be less risky and, when comparing its historical volatility, Hormel Foods is 18.58 times less risky than Nuzee. The stock trades about -0.02 of its potential returns per unit of risk. The Nuzee Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,093  in Nuzee Inc on September 12, 2024 and sell it today you would lose (994.00) from holding Nuzee Inc or give up 90.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.55%
Values	Daily Returns

Hormel Foods  vs.  Nuzee Inc

Hormel Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Hormel Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nuzee Inc

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Nuzee Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Nuzee exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hormel Foods and Nuzee

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

The idea behind Hormel Foods and Nuzee Inc 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.