Correlation Between Hormel Foods and J+J SNACK

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

By analyzing existing cross correlation between Hormel Foods and JJ SNACK FOODS, you can compare the effects of market volatilities on Hormel Foods and J+J SNACK 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 J+J SNACK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hormel Foods and J+J SNACK.

Diversification Opportunities for Hormel Foods and J+J SNACK

0.62

Correlation Coefficient

Hormel Foods  J+J SNACK

Poor diversification

The 3 months correlation between Hormel and J+J is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hormel Foods and JJ SNACK FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JJ SNACK 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 J+J SNACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JJ SNACK FOODS has no effect on the direction of Hormel Foods i.e., Hormel Foods and J+J SNACK go up and down completely randomly.

Pair Corralation between Hormel Foods and J+J SNACK

Assuming the 90 days horizon Hormel Foods is expected to generate 1.44 times more return on investment than J+J SNACK. However, Hormel Foods is 1.44 times more volatile than JJ SNACK FOODS. It trades about 0.13 of its potential returns per unit of risk. JJ SNACK FOODS is currently generating about 0.18 per unit of risk. If you would invest  2,813  in Hormel Foods on September 13, 2024 and sell it today you would earn a total of  315.00  from holding Hormel Foods or generate 11.2% return on investment over 90 days.

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

Hormel Foods  vs.  JJ SNACK FOODS

Hormel Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hormel Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JJ SNACK FOODS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JJ SNACK FOODS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, J+J SNACK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hormel Foods and J+J SNACK

The main advantage of trading using opposite Hormel Foods and J+J SNACK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hormel Foods position performs unexpectedly, J+J SNACK 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 J+J SNACK will offset losses from the drop in J+J SNACK's long position.

The idea behind Hormel Foods and JJ SNACK 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.