Correlation Between Tootsie Roll and Hershey

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

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

Diversification Opportunities for Tootsie Roll and Hershey

0.73

Correlation Coefficient

Tootsie Roll  Hershey

Poor diversification

The 3 months correlation between Tootsie and Hershey is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tootsie Roll Industries and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and Tootsie Roll 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 Tootsie Roll Industries 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 Tootsie Roll i.e., Tootsie Roll and Hershey go up and down completely randomly.

Pair Corralation between Tootsie Roll and Hershey

Allowing for the 90-day total investment horizon Tootsie Roll Industries is expected to under-perform the Hershey. But the stock apears to be less risky and, when comparing its historical volatility, Tootsie Roll Industries is 1.54 times less risky than Hershey. The stock trades about -0.03 of its potential returns per unit of risk. The Hershey Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  17,463  in Hershey Co on November 28, 2024 and sell it today you would earn a total of  402.00  from holding Hershey Co or generate 2.3% return on investment over 90 days.

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

Tootsie Roll Industries  vs.  Hershey Co

Tootsie Roll Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tootsie Roll Industries has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Hershey

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hershey Co are ranked lower than 2 (%) 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 Tootsie Roll and Hershey

The main advantage of trading using opposite Tootsie Roll and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tootsie Roll 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 Tootsie Roll Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.