Correlation Between JBS SA and Hormel Foods

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

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

Diversification Opportunities for JBS SA and Hormel Foods

0.45

Correlation Coefficient

JBS SA  Hormel Foods

Very weak diversification

The 3 months correlation between JBS and Hormel is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding JBS SA and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and JBS SA 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 JBS SA 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 JBS SA i.e., JBS SA and Hormel Foods go up and down completely randomly.

Pair Corralation between JBS SA and Hormel Foods

Assuming the 90 days horizon JBS SA is expected to generate 1.57 times more return on investment than Hormel Foods. However, JBS SA is 1.57 times more volatile than Hormel Foods. It trades about 0.05 of its potential returns per unit of risk. Hormel Foods is currently generating about -0.03 per unit of risk. If you would invest  749.00  in JBS SA on October 9, 2024 and sell it today you would earn a total of  436.00  from holding JBS SA or generate 58.21% return on investment over 90 days.

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

JBS SA  vs.  Hormel Foods

JBS SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Hormel Foods

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with JBS SA and Hormel Foods

The main advantage of trading using opposite JBS SA and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JBS SA 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 JBS SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.