Correlation Between General Mills and Tootsie Roll

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

By analyzing existing cross correlation between General Mills and Tootsie Roll Industries, you can compare the effects of market volatilities on General Mills 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 General Mills with a short position of Tootsie Roll. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and Tootsie Roll.

Diversification Opportunities for General Mills and Tootsie Roll

-0.35

Correlation Coefficient

General Mills  Tootsie Roll

Very good diversification

The 3 months correlation between General and Tootsie is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Mills 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 General Mills 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 General Mills 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 General Mills i.e., General Mills and Tootsie Roll go up and down completely randomly.

Pair Corralation between General Mills and Tootsie Roll

Considering the 90-day investment horizon General Mills is expected to under-perform the Tootsie Roll. But the stock apears to be less risky and, when comparing its historical volatility, General Mills is 1.26 times less risky than Tootsie Roll. The stock trades about -0.21 of its potential returns per unit of risk. The Tootsie Roll Industries is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,176  in Tootsie Roll Industries on October 22, 2024 and sell it today you would lose (52.00) from holding Tootsie Roll Industries or give up 1.64% of portfolio value over 90 days.

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

General Mills  vs.  Tootsie Roll Industries

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Tootsie Roll Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tootsie Roll Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tootsie Roll is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with General Mills and Tootsie Roll

The main advantage of trading using opposite General Mills and Tootsie Roll positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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.

The idea behind General Mills and Tootsie Roll Industries 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.