The Chemours Company had a fantastic start to 2023

The Chemours Company is a diversified chemical company serving multiple industries. Here are its products:

Exhibit 1:

Here's the graph of the monthly returns of the Vanguard S&P 500 Index ETF and the Chemours Company:  

Exhibit 2:

Source: Data Provided by IEX Cloud, Graph Created Using Microsoft Excel and RStudio

The Chemours Company averaged a monthly return of 2.59% compared to a 1% return for the Vanguard S&P 500 Index ETF (Exhibits 3 & 4). 

Exhibit 3:

Source: Data Provided by IEX Cloud, Calculated Using Microsoft Excel

Exhibit 4:

Source: Data Provided by IEX Cloud, Calculated Using Microsoft Excel

A linear regression of the monthly returns of the Vanguard S&P 500 Index ETF and the Chemours Company estimates the beta (the coefficient of the Vanguard S&P 500 Index) as 1.82. Yahoo Finance estimates the beta as 1.88 based on five years of monthly returns.   

Here's the output from the linear model:  
 

Call:

lm(formula = CC_Monthly_Return ~ VOO_Monthly_Return, data = VOOandCC)

Residuals:

     Min       1Q   Median       3Q      Max 

-0.23930 -0.07880  0.01016  0.07621  0.29157 

Coefficients:

                   Estimate Std. Error t value Pr(>|t|)    

(Intercept)        0.006698   0.018764   0.357    0.723    

VOO_Monthly_Return 1.825643   0.325520   5.608 1.45e-06 ***

---

Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1

Residual standard error: 0.1224 on 42 degrees of freedom

Multiple R-squared:  0.4282, Adjusted R-squared:  0.4146 

F-statistic: 31.45 on 1 and 42 DF,  p-value: 1.45e-06

The stock had a great January 2023 with a return of 18% compared to a 6.2% return of the Vanguard S&P 500 Index ETF.  

Here's the chart of the monthly returns of the Vanguard S&P 500 Index and the Chemours Company:

Exhibit 5:

Source: Data Provided by IEX Cloud, Calculated Using Microsoft Excel

Hormel Foods' Lower Returns than the Vanguard S&P 500 Index ETF

Hormel Foods own several iconic brands shown in the images below.  

Source: Hormel Foods Corporation

Hormel Foods (HRL) has averaged a lower monthly return than the Vanguard S&P 500 Index ETF (VOO). The company has averaged a monthly return of 46 basis points compared to 105 basis points for the Vanguard S&P 500 Index ETF (Exhibits 1& 2).     

Exhibit 1:

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel

Exhibit 2:

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel

A linear regression of the monthly returns of the Vanguard S&P 500 Index ETF and Hormel Foods yields a beta of 0.237.  

Here's the output from the linear regression model created using RStudio:

Call:

lm(formula = HRL_Monthly_Return ~ VOO_Monthly_Return, data = VOOandHRL)

Residuals:

      Min        1Q    Median        3Q       Max 

-0.102639 -0.023972 -0.001719  0.022192  0.166993 

Coefficients:

                   Estimate Std. Error t value Pr(>|t|)

(Intercept)        0.002084   0.008249   0.253    0.802

VOO_Monthly_Return 0.237144   0.143102   1.657    0.105

Residual standard error: 0.0538 on 42 degrees of freedom

Multiple R-squared:  0.06137, Adjusted R-squared:  0.03902 

F-statistic: 2.746 on 1 and 42 DF,  p-value: 0.1049

The p-value of 0.1 indicates that the relationship is insignificant at the 95% confidence interval.

Between June 2019 and January 2023, the monthly returns of the Vanguard S&P 500 Index ETF and Hormel Foods had a positive correlation of 0.24. But between September 2020 and August 2021, the correlation was a negative 0.13 (Exhibit: 3). This was when stocks such as Apple, Microsoft, Amazon, and Tesla went on an epic, once-in-a-lifetime run into the trillion-dollar club in terms of market capitalization. Consumer staples stocks such as Hormel Foods went out of favor during this period, dropping 10.8%. 

Exhibit 3:

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel and RStudio

Hormel Foods may be the perfect stock to own during a bear market. Its low volatility and, at times, negative correlation with the S&P 500 Index means it performs well when the markets perform poorly.  
 

     

Clorox's Poor Average Monthly Returns

Clorox makes household products such as wipes, sprays, and bleach (Exhibit 1). 

Exhibit 1: 

Source: Clorox Website

Over the past decade, Clorox has underperformed compared to the S&P 500 Index. An analysis of the monthly returns of Clorox and the Vanguard S&P 500 Index ETF between June 2019 and January 2023 shows that Clorox continued its poor performance. Clorox's monthly return averaged 0.1%, while the Vanguard S&P 500 Index returned 1% (Exhibits 2 & 3). Even the third quartile average monthly return of 3.2% of Clorox fell below the 4.8% returned by the Vanguard S&P 500 Index ETF (Exhibits 2 & 3).  

Exhibit 2:

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel

Exhibit 3:

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel

The monthly returns of Clorox and the Vanguard S&P 500 Index ETF between June 2019 and January 2023 show a low correlation of 0.24. 

A rolling correlation of the monthly returns conducted using RStudio shows a low positive correlation of 0.02 between August 2020 and July 2021 (Exhibit 4). 

Exhibit 4:

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel, RStudio

 A linear regression of the monthly returns shows a very low beta of 0.25 for Clorox. But, the p-value of 0.1 shows that the relationship may not be significant at the 95% confidence interval.  

Call:

lm(formula = CLX_Monthly_Return ~ VOO_Monthly_Return, data = VOOandCLX)

Residuals:

      Min        1Q    Median        3Q       Max 

-0.141038 -0.033613  0.000236  0.036959  0.120780 

Coefficients:

                    Estimate Std. Error t value Pr(>|t|)

(Intercept)        -0.001581   0.008864  -0.178    0.859

VOO_Monthly_Return  0.252497   0.153777   1.642    0.108

Residual standard error: 0.05781 on 42 degrees of freedom

Multiple R-squared:  0.06032, Adjusted R-squared:  0.03795 

F-statistic: 2.696 on 1 and 42 DF,  p-value: 0.1081 

Here's the graph of the monthly returns of the Vanguard S&P 500 Index ETF and Clorox (Exhibit 5) and the residuals plot from the linear regression (Exhibit 6).

Exhibit 5:   

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel, RStudio

Exhibit 6:

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel, RStudio

  
 

     

Change in Correlation of the Monthly Returns of Generac Holdings and the Vanguard S&P 500 Index ETF

Generac Holdings (GNRC) has a beta of 1.19 based on a linear regression model of the monthly returns of the Vanguard S&P 500 Index ETF (VOO) and Generac Holdings. The company's residential sales slowdown has pushed the stock lower over the past five months. The stock has dropped 55% compared to a 7% drop for the Vanguard S&P 500 Index ETF over the past year. This massive underperformance of the stock has led to a drop in the monthly return correlation of the Vanguard ETF and Generac Holdings.  

     Exhibit 1: A Generac Generator

Source: Generac Holdings Inc.

Here's the graph of the Vanguard S&P 500 Index ETF and Generac Holdings' monthly returns (Exhibit 2).  

Exhibit 2: Monthly Returns of the Vanguard S&P 500 Index ETF and Generac Holdings

Source: Data Provided by IEX Cloud, Author Calculations on Microsoft Excel, Graph Created on RStudio

The graph of the monthly returns also shows a correlation of 0.44 between the two equities.  

Here are the betas of some of the stocks I have covered over the past few months (Exhibit 3). 

Note: Click on each image to see an enlarged version. 

 

Exhibit 3: Beta of Various stocks in the consumer staples, consumer discretionary, and industrial sectors.   

Source: Data Provided by IEX Cloud, Author Calculations using Microsoft Excel and RStudio

Here's the output from the linear regression model:

Call:

lm(formula = GNRC_Monthly_Return ~ VOO_Monthly_Return, data = VOOandGNRC)

Residuals:

     Min       1Q   Median       3Q      Max 

-0.46400 -0.09209  0.00221  0.10001  0.28690 

Coefficients:

                   Estimate Std. Error t value Pr(>|t|)   

(Intercept)         0.01733    0.02170   0.798  0.42915   

VOO_Monthly_Return  1.19915    0.37646   3.185  0.00273 **

---

Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1

Residual standard error: 0.1415 on 42 degrees of freedom

Multiple R-squared:  0.1946, Adjusted R-squared:  0.1754 

F-statistic: 10.15 on 1 and 42 DF,  p-value: 0.002726

The slope of the line is the beta for the stock. In this linear regression model, the co-efficient of VOO_MonthlyReturn (1.19915) is the beta for Generac Holdings. 

The monthly return statistics for Generac holdings show that the stock has a very high standard deviation of 15% in its monthly returns (Exhibit 4).

Exhibit 4: Generac Holdings Monthly Return Statistics [June 2019 - January 2023]    

Source: Data Provided by IEX Cloud, Author Calculations Using Microsoft Excel

Here are the return statistics for the Vanguard S&P 500 Index ETF during the same period (Exhibit 5).

Exhibit 5: Vanguard S&P 500 Index ETF Monthly Return Statistics  [June 2019 - January 2023]  

Source: Data Provided by IEX Cloud, Author Calculations Using Microsoft Excel

The Vanguard S&P 500 Index ETF and Generac Holdings' monthly returns had a high positive correlation of 0.72 between October 2021 and September 2022 (Exhibit 6).   

Exhibit 6: Monthly Return Correlation of the Vanguard S&P 500 Index ETF and Generac Holdings

Source: Data Provided by IEX Cloud, Author Calculations Using Microsoft Excel and RStudio