Correlation Between Mondelez International and Hershey

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

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

Diversification Opportunities for Mondelez International and Hershey

0.85

Correlation Coefficient

Mondelez International  Hershey

Very poor diversification

The 3 months correlation between Mondelez and Hershey is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Mondelez International and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and Mondelez International 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 Mondelez International 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 Mondelez International i.e., Mondelez International and Hershey go up and down completely randomly.

Pair Corralation between Mondelez International and Hershey

Given the investment horizon of 90 days Mondelez International is expected to generate 0.84 times more return on investment than Hershey. However, Mondelez International is 1.19 times less risky than Hershey. It trades about 0.15 of its potential returns per unit of risk. Hershey Co is currently generating about 0.02 per unit of risk. If you would invest  5,909  in Mondelez International on December 29, 2024 and sell it today you would earn a total of  863.00  from holding Mondelez International or generate 14.6% return on investment over 90 days.

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

Mondelez International  vs.  Hershey Co

Mondelez International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mondelez International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Mondelez International showed solid returns over the last few months and may actually be approaching a breakup point.

Hershey

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hershey Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Mondelez International and Hershey

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

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.