Correlation Between Mondelez International and Hershey
Can any of the company-specific risk be diversified away by investing in both Mondelez International and Hershey 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 Mondelez International and Hershey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mondelez International and Hershey Co, you can compare the effects of market volatilities on Mondelez International and Hershey 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 Mondelez International with a short position of Hershey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mondelez International and Hershey.
Diversification Opportunities for Mondelez International and Hershey
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mondelez and Hershey is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mondelez International and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and Mondelez International 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 Mondelez International are associated (or correlated) with Hershey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hershey has no effect on the direction of Mondelez International i.e., Mondelez International and Hershey go up and down completely randomly.
Pair Corralation between Mondelez International and Hershey
Given the investment horizon of 90 days Mondelez International is expected to under-perform the Hershey. But the stock apears to be less risky and, when comparing its historical volatility, Mondelez International is 1.46 times less risky than Hershey. The stock trades about -0.27 of its potential returns per unit of risk. The Hershey Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 18,138 in Hershey Co on August 28, 2024 and sell it today you would lose (584.00) from holding Hershey Co or give up 3.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mondelez International vs. Hershey Co
Performance |
| Timeline |
| Mondelez International |
| Hershey |
Mondelez International and Hershey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mondelez International and Hershey
The main advantage of trading using opposite Mondelez International and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mondelez International position performs unexpectedly, Hershey 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 Hershey will offset losses from the drop in Hershey's long position.The idea behind Mondelez International and Hershey Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Hershey vs. Tootsie Roll Industries | Hershey vs. Rocky Mountain Chocolate | Hershey vs. Chocoladefabriken Lindt Sprngli | Hershey vs. Mondelez International |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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