Correlation Between Rocky Mountain and Hershey
Can any of the company-specific risk be diversified away by investing in both Rocky Mountain 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 Rocky Mountain and Hershey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocky Mountain Chocolate and Hershey Co, you can compare the effects of market volatilities on Rocky Mountain 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 Rocky Mountain with a short position of Hershey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and Hershey.
Diversification Opportunities for Rocky Mountain and Hershey
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rocky and Hershey is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Chocolate and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and Rocky Mountain 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 Rocky Mountain Chocolate 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 Rocky Mountain i.e., Rocky Mountain and Hershey go up and down completely randomly.
Pair Corralation between Rocky Mountain and Hershey
Given the investment horizon of 90 days Rocky Mountain Chocolate is expected to under-perform the Hershey. In addition to that, Rocky Mountain is 2.37 times more volatile than Hershey Co. It trades about -0.18 of its total potential returns per unit of risk. Hershey Co is currently generating about -0.08 per unit of volatility. If you would invest 18,138 in Hershey Co on August 27, 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocky Mountain Chocolate vs. Hershey Co
Performance |
| Timeline |
| Rocky Mountain Chocolate |
| Hershey |
Rocky Mountain and Hershey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocky Mountain and Hershey
The main advantage of trading using opposite Rocky Mountain and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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.| Rocky Mountain vs. Mondelez International | Rocky Mountain vs. Tootsie Roll Industries | Rocky Mountain vs. Chocoladefabriken Lindt Sprngli | Rocky Mountain vs. Barry Callebaut AG |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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