Correlation Between Iron Mountain and Hormel Foods

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

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

Diversification Opportunities for Iron Mountain and Hormel Foods

0.11

Correlation Coefficient

Iron Mountain  Hormel Foods

Average diversification

The 3 months correlation between Iron and Hormel is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Iron Mountain 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 Iron Mountain Incorporated are associated (or correlated) with Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of Iron Mountain i.e., Iron Mountain and Hormel Foods go up and down completely randomly.

Pair Corralation between Iron Mountain and Hormel Foods

Assuming the 90 days trading horizon Iron Mountain Incorporated is expected to under-perform the Hormel Foods. In addition to that, Iron Mountain is 2.15 times more volatile than Hormel Foods. It trades about -0.1 of its total potential returns per unit of risk. Hormel Foods is currently generating about 0.26 per unit of volatility. If you would invest  17,720  in Hormel Foods on October 6, 2024 and sell it today you would earn a total of  1,980  from holding Hormel Foods or generate 11.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.37%
Values	Daily Returns

Iron Mountain Incorporated  vs.  Hormel Foods

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hormel Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hormel Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Mountain and Hormel Foods

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

The idea behind Iron Mountain Incorporated and Hormel 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..