Correlation Between Hershey and Faron Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Hershey and Faron Pharmaceuticals 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 Faron Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hershey Co and Faron Pharmaceuticals Oy, you can compare the effects of market volatilities on Hershey and Faron Pharmaceuticals 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 Faron Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey and Faron Pharmaceuticals.
Diversification Opportunities for Hershey and Faron Pharmaceuticals
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hershey and Faron is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Faron Pharmaceuticals Oy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faron Pharmaceuticals 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 Faron Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faron Pharmaceuticals has no effect on the direction of Hershey i.e., Hershey and Faron Pharmaceuticals go up and down completely randomly.
Pair Corralation between Hershey and Faron Pharmaceuticals
Assuming the 90 days trading horizon Hershey Co is expected to under-perform the Faron Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Hershey Co is 1.39 times less risky than Faron Pharmaceuticals. The stock trades about -0.03 of its potential returns per unit of risk. The Faron Pharmaceuticals Oy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 15,250 in Faron Pharmaceuticals Oy on September 24, 2024 and sell it today you would earn a total of 1,250 from holding Faron Pharmaceuticals Oy or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hershey Co vs. Faron Pharmaceuticals Oy
Performance |
| Timeline |
| Hershey |
| Faron Pharmaceuticals |
Hershey and Faron Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hershey and Faron Pharmaceuticals
The main advantage of trading using opposite Hershey and Faron Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Faron Pharmaceuticals 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 Faron Pharmaceuticals will offset losses from the drop in Faron Pharmaceuticals' long position.| Hershey vs. Batm Advanced Communications | Hershey vs. Universal Display Corp | Hershey vs. Zegona Communications Plc | Hershey vs. Livermore Investments Group |
| Faron Pharmaceuticals vs. Toyota Motor Corp | Faron Pharmaceuticals vs. SoftBank Group Corp | Faron Pharmaceuticals vs. OTP Bank Nyrt | Faron Pharmaceuticals vs. Public Service Enterprise |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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