Correlation Between Mowi ASA and Hormel Foods

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

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

Diversification Opportunities for Mowi ASA and Hormel Foods

0.76

Correlation Coefficient

Mowi ASA  Hormel Foods

Poor diversification

The 3 months correlation between Mowi and Hormel is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Mowi ASA and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods and Mowi ASA 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 Mowi ASA 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 Mowi ASA i.e., Mowi ASA and Hormel Foods go up and down completely randomly.

Pair Corralation between Mowi ASA and Hormel Foods

Assuming the 90 days horizon Mowi ASA is expected to under-perform the Hormel Foods. But the stock apears to be less risky and, when comparing its historical volatility, Mowi ASA is 1.32 times less risky than Hormel Foods. The stock trades about -0.22 of its potential returns per unit of risk. The Hormel Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,961  in Hormel Foods on September 26, 2024 and sell it today you would earn a total of  66.00  from holding Hormel Foods or generate 2.23% return on investment over 90 days.

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

Mowi ASA  vs.  Hormel Foods

Mowi ASA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mowi ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mowi ASA reported 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 nearly fragile basic indicators, Hormel Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mowi ASA and Hormel Foods

The main advantage of trading using opposite Mowi ASA and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mowi ASA 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 Mowi ASA 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.