Correlation Between Nuzee and Hormel Foods

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

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

Diversification Opportunities for Nuzee and Hormel Foods

0.4

Correlation Coefficient

Nuzee  Hormel Foods

Very weak diversification

The 3 months correlation between Nuzee and Hormel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nuzee Inc and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Nuzee 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 Nuzee Inc 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 Nuzee i.e., Nuzee and Hormel Foods go up and down completely randomly.

Pair Corralation between Nuzee and Hormel Foods

Given the investment horizon of 90 days Nuzee Inc is expected to generate 78.62 times more return on investment than Hormel Foods. However, Nuzee is 78.62 times more volatile than Hormel Foods. It trades about 0.11 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.1 per unit of risk. If you would invest  107.00  in Nuzee Inc on September 12, 2024 and sell it today you would lose (8.00) from holding Nuzee Inc or give up 7.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.81%
Values	Daily Returns

Nuzee Inc  vs.  Hormel Foods

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.

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.

Pair Trading with Nuzee and Hormel Foods

The main advantage of trading using opposite Nuzee and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuzee 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 Nuzee Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.