Correlation Between Hormel Foods and BG Foods

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Can any of the company-specific risk be diversified away by investing in both Hormel Foods and BG 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 Hormel Foods and BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hormel Foods and BG Foods, you can compare the effects of market volatilities on Hormel Foods and BG 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 Hormel Foods with a short position of BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and BG Foods.

Diversification Opportunities for Hormel Foods and BG Foods

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hormel and BG Foods is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Hormel Foods 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 Hormel Foods are associated (or correlated) with BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Hormel Foods i.e., Hormel Foods and BG Foods go up and down completely randomly.

Pair Corralation between Hormel Foods and BG Foods

Considering the 90-day investment horizon Hormel Foods is expected to generate 0.31 times more return on investment than BG Foods. However, Hormel Foods is 3.22 times less risky than BG Foods. It trades about 0.14 of its potential returns per unit of risk. BG Foods is currently generating about -0.22 per unit of risk. If you would invest  4,606  in Hormel Foods on September 5, 2022 and sell it today you would earn a total of  158.00  from holding Hormel Foods or generate 3.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hormel Foods  vs.  BG Foods

 Performance (%) 
       Timeline  
Hormel Foods 
Hormel Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Hormel Foods is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Hormel Price Channel

BG Foods 
BG Foods Performance
0 of 100
Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

BG Foods Price Channel

Hormel Foods and BG Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hormel Foods and BG Foods

The main advantage of trading using opposite Hormel Foods and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, BG 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 BG Foods will offset losses from the drop in BG Foods' long position.
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The idea behind Hormel Foods and BG 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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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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