Correlation Between Hershey and China Mengniu
Can any of the company-specific risk be diversified away by investing in both Hershey and China Mengniu 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 China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hershey Co and China Mengniu Dairy, you can compare the effects of market volatilities on Hershey and China Mengniu 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 China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey and China Mengniu.
Diversification Opportunities for Hershey and China Mengniu
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hershey and China is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and China Mengniu Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mengniu Dairy 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 China Mengniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mengniu Dairy has no effect on the direction of Hershey i.e., Hershey and China Mengniu go up and down completely randomly.
Pair Corralation between Hershey and China Mengniu
Considering the 90-day investment horizon Hershey Co is expected to generate 0.45 times more return on investment than China Mengniu. However, Hershey Co is 2.24 times less risky than China Mengniu. It trades about -0.03 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.03 per unit of risk. If you would invest 22,453 in Hershey Co on September 14, 2024 and sell it today you would lose (4,753) from holding Hershey Co or give up 21.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hershey Co vs. China Mengniu Dairy
Performance |
| Timeline |
| Hershey |
| China Mengniu Dairy |
Hershey and China Mengniu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hershey and China Mengniu
The main advantage of trading using opposite Hershey and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, China Mengniu 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 China Mengniu will offset losses from the drop in China Mengniu's long position.| Hershey vs. Tootsie Roll Industries | Hershey vs. Rocky Mountain Chocolate | Hershey vs. Chocoladefabriken Lindt Sprngli | Hershey vs. Mondelez International |
| China Mengniu vs. Nestle SA ADR | China Mengniu vs. ConAgra Foods | China Mengniu vs. Hormel Foods | China Mengniu vs. Kraft Heinz Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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