Correlation Between Hershey and Chocoladefabriken

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

By analyzing existing cross correlation between Hershey Co and Chocoladefabriken Lindt Sprngli, you can compare the effects of market volatilities on Hershey and Chocoladefabriken 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 Chocoladefabriken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey and Chocoladefabriken.

Diversification Opportunities for Hershey and Chocoladefabriken

0.5

Correlation Coefficient

Hershey  Chocoladefabriken

Very weak diversification

The 3 months correlation between Hershey and Chocoladefabriken is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Chocoladefabriken Lindt Sprngl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chocoladefabriken Lindt 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 Chocoladefabriken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chocoladefabriken Lindt has no effect on the direction of Hershey i.e., Hershey and Chocoladefabriken go up and down completely randomly.

Pair Corralation between Hershey and Chocoladefabriken

Considering the 90-day investment horizon Hershey Co is expected to under-perform the Chocoladefabriken. But the stock apears to be less risky and, when comparing its historical volatility, Hershey Co is 1.51 times less risky than Chocoladefabriken. The stock trades about 0.0 of its potential returns per unit of risk. The Chocoladefabriken Lindt Sprngli is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,126  in Chocoladefabriken Lindt Sprngli on December 24, 2024 and sell it today you would earn a total of  236.00  from holding Chocoladefabriken Lindt Sprngli or generate 20.96% return on investment over 90 days.

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

Hershey Co  vs.  Chocoladefabriken Lindt Sprngl

Hershey

Risk-Adjusted Performance

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 fairly strong basic indicators, Hershey is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Chocoladefabriken Lindt

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chocoladefabriken Lindt Sprngli are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chocoladefabriken showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hershey and Chocoladefabriken

The main advantage of trading using opposite Hershey and Chocoladefabriken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Chocoladefabriken 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 Chocoladefabriken will offset losses from the drop in Chocoladefabriken's long position.

The idea behind Hershey Co and Chocoladefabriken Lindt Sprngli 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 Transaction History module to view history of all your transactions and understand their impact on performance.