Correlation Between Hershey and Archer Daniels
Can any of the company-specific risk be diversified away by investing in both Hershey and Archer Daniels 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 Archer Daniels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hershey Co and Archer Daniels Midland, you can compare the effects of market volatilities on Hershey and Archer Daniels 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 Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey and Archer Daniels.
Diversification Opportunities for Hershey and Archer Daniels
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hershey and Archer is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Hershey i.e., Hershey and Archer Daniels go up and down completely randomly.
Pair Corralation between Hershey and Archer Daniels
Considering the 90-day investment horizon Hershey Co is expected to generate 0.84 times more return on investment than Archer Daniels. However, Hershey Co is 1.19 times less risky than Archer Daniels. It trades about -0.06 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.06 per unit of risk. If you would invest 19,466 in Hershey Co on August 24, 2024 and sell it today you would lose (1,971) from holding Hershey Co or give up 10.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hershey Co vs. Archer Daniels Midland
Performance |
| Timeline |
| Hershey |
| Archer Daniels Midland |
Hershey and Archer Daniels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hershey and Archer Daniels
The main advantage of trading using opposite Hershey and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.| Hershey vs. Rocky Mountain Chocolate | Hershey vs. Chocoladefabriken Lindt Sprngli | Hershey vs. Barry Callebaut AG |
| Archer Daniels vs. Tyson Foods | Archer Daniels vs. Cal Maine Foods | Archer Daniels vs. Dole PLC | Archer Daniels vs. Adecoagro SA |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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