Correlation Between Hershey and Mondelez International

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Can any of the company-specific risk be diversified away by investing in both Hershey and Mondelez International 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 Mondelez International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hershey Co and Mondelez International, you can compare the effects of market volatilities on Hershey and Mondelez International 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 Mondelez International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey and Mondelez International.

Diversification Opportunities for Hershey and Mondelez International

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Hershey and Mondelez is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Mondelez International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondelez International 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 Mondelez International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondelez International has no effect on the direction of Hershey i.e., Hershey and Mondelez International go up and down completely randomly.

Pair Corralation between Hershey and Mondelez International

Considering the 90-day investment horizon Hershey Co is expected to generate 1.72 times more return on investment than Mondelez International. However, Hershey is 1.72 times more volatile than Mondelez International. It trades about 0.13 of its potential returns per unit of risk. Mondelez International is currently generating about -0.19 per unit of risk. If you would invest  18,621  in Hershey Co on December 30, 2023 and sell it today you would earn a total of  829.00  from holding Hershey Co or generate 4.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hershey Co  vs.  Mondelez International

 Performance 
       Timeline  
Hershey 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Insignificant
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 new stock price disturbance, may contribute to short-term losses for the investors.
Mondelez International 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 fairly strong essential indicators, Mondelez International is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Hershey and Mondelez International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hershey and Mondelez International

The main advantage of trading using opposite Hershey and Mondelez International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Mondelez International 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 Mondelez International will offset losses from the drop in Mondelez International's long position.
The idea behind Hershey Co and Mondelez International 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.
Check out your portfolio center.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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