Correlation Between Hershey and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Hershey and Verizon Communications 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 Hershey and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hershey Co and Verizon Communications, you can compare the effects of market volatilities on Hershey and Verizon Communications 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 Hershey with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey and Verizon Communications.
Diversification Opportunities for Hershey and Verizon Communications
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hershey and Verizon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Hershey 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 Hershey Co are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Hershey i.e., Hershey and Verizon Communications go up and down completely randomly.
Pair Corralation between Hershey and Verizon Communications
Assuming the 90 days trading horizon Hershey Co is expected to under-perform the Verizon Communications. In addition to that, Hershey is 1.17 times more volatile than Verizon Communications. It trades about -0.01 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.01 per unit of volatility. If you would invest 3,760 in Verizon Communications on October 16, 2024 and sell it today you would earn a total of 40.00 from holding Verizon Communications or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.25% |
| Values | Daily Returns |
Hershey Co vs. Verizon Communications
Performance |
| Timeline |
| Hershey |
| Verizon Communications |
Hershey and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hershey and Verizon Communications
The main advantage of trading using opposite Hershey and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Hershey vs. Verizon Communications | Hershey vs. Universal Display Corp | Hershey vs. Europa Metals | Hershey vs. Empire Metals Limited |
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 the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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