Correlation Between Hershey and Chocoladefabriken

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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

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Hershey and Chocoladefabriken is 0.9. 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 generate 0.96 times more return on investment than Chocoladefabriken. However, Hershey Co is 1.04 times less risky than Chocoladefabriken. It trades about -0.12 of its potential returns per unit of risk. Chocoladefabriken Lindt Sprngli is currently generating about -0.17 per unit of risk. If you would invest  19,651  in Hershey Co on September 5, 2024 and sell it today you would lose (1,864) from holding Hershey Co or give up 9.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Hershey Co  vs.  Chocoladefabriken Lindt Sprngl

 Performance 
       Timeline  
Hershey 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Chocoladefabriken Lindt 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chocoladefabriken Lindt Sprngli has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hershey and Chocoladefabriken Volatility Contrast

   Predicted Return Density   
       Returns  

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.
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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