Correlation Between Mondelez International and Tootsie Roll

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

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

Diversification Opportunities for Mondelez International and Tootsie Roll

-0.8

Correlation Coefficient

Mondelez International  Tootsie Roll

Pay attention - limited upside

The 3 months correlation between Mondelez and Tootsie is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mondelez International 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 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 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 Mondelez International i.e., Mondelez International and Tootsie Roll go up and down completely randomly.

Pair Corralation between Mondelez International and Tootsie Roll

Given the investment horizon of 90 days Mondelez International is expected to under-perform the Tootsie Roll. But the stock apears to be less risky and, when comparing its historical volatility, Mondelez International is 2.37 times less risky than Tootsie Roll. The stock trades about -0.24 of its potential returns per unit of risk. The Tootsie Roll Industries is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Tootsie Roll Industries on September 5, 2024 and sell it today you would earn a total of  300.00  from holding Tootsie Roll Industries or generate 10.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	35.94%
Values	Daily Returns

Mondelez International  vs.  Tootsie Roll Industries

Mondelez International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondelez International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tootsie Roll Industries

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Tootsie Roll Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak essential indicators, Tootsie Roll sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mondelez International and Tootsie Roll

The main advantage of trading using opposite Mondelez International and Tootsie Roll positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mondelez International 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 Mondelez International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.