Correlation Between Central Garden and Hershey

Can any of the company-specific risk be diversified away by investing in both Central Garden 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 Central Garden and Hershey into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Garden Pet and Hershey Co, you can compare the effects of market volatilities on Central Garden 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 Central Garden with a short position of Hershey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and Hershey.

Diversification Opportunities for Central Garden and Hershey

-0.41

Correlation Coefficient

Central Garden  Hershey

Very good diversification

The 3 months correlation between Central and Hershey is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and Central Garden 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 Central Garden Pet 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 Central Garden i.e., Central Garden and Hershey go up and down completely randomly.

Pair Corralation between Central Garden and Hershey

Assuming the 90 days horizon Central Garden Pet is expected to generate 1.21 times more return on investment than Hershey. However, Central Garden is 1.21 times more volatile than Hershey Co. It trades about 0.0 of its potential returns per unit of risk. Hershey Co is currently generating about -0.02 per unit of risk. If you would invest  3,445  in Central Garden Pet on October 2, 2024 and sell it today you would lose (140.00) from holding Central Garden Pet or give up 4.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Central Garden Pet  vs.  Hershey Co

Central Garden Pet

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hershey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hershey Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Central Garden and Hershey

The main advantage of trading using opposite Central Garden and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden 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 Central Garden Pet 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.