Correlation Between JM Smucker and Hormel Foods

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

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

Diversification Opportunities for JM Smucker and Hormel Foods

0.16

Correlation Coefficient

JM Smucker  Hormel Foods

Average diversification

The 3 months correlation between SJM and Hormel is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and JM Smucker 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 JM Smucker 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 JM Smucker i.e., JM Smucker and Hormel Foods go up and down completely randomly.

Pair Corralation between JM Smucker and Hormel Foods

Considering the 90-day investment horizon JM Smucker is expected to generate 1.19 times more return on investment than Hormel Foods. However, JM Smucker is 1.19 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 -0.06 per unit of risk. If you would invest  10,978  in JM Smucker on December 26, 2024 and sell it today you would earn a total of  470.00  from holding JM Smucker or generate 4.28% return on investment over 90 days.

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

JM Smucker  vs.  Hormel Foods

JM Smucker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JM Smucker are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking indicators, JM Smucker is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Hormel Foods

Risk-Adjusted Performance

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.

Pair Trading with JM Smucker and Hormel Foods

The main advantage of trading using opposite JM Smucker and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker 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 JM Smucker 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.