Correlation Between Toyota and Hershey

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

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

Diversification Opportunities for Toyota and Hershey

-0.37

Correlation Coefficient

Toyota  Hershey

Very good diversification

The 3 months correlation between Toyota and Hershey is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and Toyota 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 Toyota Motor Corp 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 Toyota i.e., Toyota and Hershey go up and down completely randomly.

Pair Corralation between Toyota and Hershey

Assuming the 90 days trading horizon Toyota Motor Corp is expected to under-perform the Hershey. In addition to that, Toyota is 1.11 times more volatile than Hershey Co. It trades about -0.07 of its total potential returns per unit of risk. Hershey Co is currently generating about 0.03 per unit of volatility. If you would invest  16,633  in Hershey Co on December 29, 2024 and sell it today you would earn a total of  467.00  from holding Hershey Co or generate 2.81% return on investment over 90 days.

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

Toyota Motor Corp  vs.  Hershey Co

Toyota Motor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 comparatively stable basic indicators, Hershey is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Toyota and Hershey

The main advantage of trading using opposite Toyota and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota 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 Toyota Motor Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.