Correlation Between Torque Lifestyle and Hormel Foods

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

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

Diversification Opportunities for Torque Lifestyle and Hormel Foods

-0.4

Correlation Coefficient

Torque Lifestyle  Hormel Foods

Very good diversification

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

Pair Corralation between Torque Lifestyle and Hormel Foods

Given the investment horizon of 90 days Torque Lifestyle Brands is expected to under-perform the Hormel Foods. In addition to that, Torque Lifestyle is 4.33 times more volatile than Hormel Foods. It trades about -0.28 of its total potential returns per unit of risk. Hormel Foods is currently generating about -0.19 per unit of volatility. If you would invest  2,998  in Hormel Foods on December 2, 2024 and sell it today you would lose (135.00) from holding Hormel Foods or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Torque Lifestyle Brands  vs.  Hormel Foods

Torque Lifestyle Brands

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Torque Lifestyle Brands are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Torque Lifestyle sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Torque Lifestyle and Hormel Foods

The main advantage of trading using opposite Torque Lifestyle and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torque Lifestyle 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 Torque Lifestyle Brands 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.