Correlation Between Hershey and Tootsie Roll
Can any of the company-specific risk be diversified away by investing in both Hershey and Tootsie Roll 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 Tootsie Roll into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hershey Co and Tootsie Roll Industries, you can compare the effects of market volatilities on Hershey and Tootsie Roll 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 Tootsie Roll. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey and Tootsie Roll.
Diversification Opportunities for Hershey and Tootsie Roll
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hershey and Tootsie is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Tootsie Roll Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tootsie Roll Industries 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 Tootsie Roll. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tootsie Roll Industries has no effect on the direction of Hershey i.e., Hershey and Tootsie Roll go up and down completely randomly.
Pair Corralation between Hershey and Tootsie Roll
Considering the 90-day investment horizon Hershey Co is expected to under-perform the Tootsie Roll. But the stock apears to be less risky and, when comparing its historical volatility, Hershey Co is 1.25 times less risky than Tootsie Roll. The stock trades about -0.01 of its potential returns per unit of risk. The Tootsie Roll Industries is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,742 in Tootsie Roll Industries on August 27, 2024 and sell it today you would earn a total of 508.00 from holding Tootsie Roll Industries or generate 18.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 61.7% |
| Values | Daily Returns |
Hershey Co vs. Tootsie Roll Industries
Performance |
| Timeline |
| Hershey |
| Tootsie Roll Industries |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Hershey and Tootsie Roll Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hershey and Tootsie Roll
The main advantage of trading using opposite Hershey and Tootsie Roll positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Tootsie Roll 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 Tootsie Roll will offset losses from the drop in Tootsie Roll's long position.| Hershey vs. Tootsie Roll Industries | Hershey vs. Rocky Mountain Chocolate | Hershey vs. Chocoladefabriken Lindt Sprngli | Hershey vs. Mondelez International |
| Tootsie Roll vs. Hershey Co | Tootsie Roll vs. Mondelez International | Tootsie Roll vs. Tootsie Roll Industries | Tootsie Roll vs. Rocky Mountain Chocolate |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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