Correlation Between Hershey and Dollar General

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

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

Diversification Opportunities for Hershey and Dollar General

0.27

Correlation Coefficient

Hershey  Dollar General

Modest diversification

The 3 months correlation between Hershey and Dollar is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Dollar General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar General 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 Dollar General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar General has no effect on the direction of Hershey i.e., Hershey and Dollar General go up and down completely randomly.

Pair Corralation between Hershey and Dollar General

Considering the 90-day investment horizon Hershey Co is expected to generate 0.96 times more return on investment than Dollar General. However, Hershey Co is 1.04 times less risky than Dollar General. It trades about -0.1 of its potential returns per unit of risk. Dollar General is currently generating about -0.35 per unit of risk. If you would invest  19,827  in Hershey Co on January 31, 2024 and sell it today you would lose (580.00) from holding Hershey Co or give up 2.93% of portfolio value over 90 days.

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

Hershey Co  vs.  Dollar General

Hershey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hershey Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Hershey is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dollar General

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dollar General are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish technical and fundamental indicators, Dollar General may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Hershey and Dollar General

The main advantage of trading using opposite Hershey and Dollar General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Dollar General 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 Dollar General will offset losses from the drop in Dollar General's long position.

The idea behind Hershey Co and Dollar General 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.