Correlation Between Mondelez International and Hershey
Can any of the company-specific risk be diversified away by investing in both Mondelez International 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 Mondelez International and Hershey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mondelez International and Hershey Co, you can compare the effects of market volatilities on Mondelez International 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 Mondelez International with a short position of Hershey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mondelez International and Hershey.
Diversification Opportunities for Mondelez International and Hershey
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mondelez and Hershey is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Mondelez International and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey 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 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 Mondelez International i.e., Mondelez International and Hershey go up and down completely randomly.
Pair Corralation between Mondelez International and Hershey
Given the investment horizon of 90 days Mondelez International is expected to generate 0.88 times more return on investment than Hershey. However, Mondelez International is 1.13 times less risky than Hershey. It trades about -0.01 of its potential returns per unit of risk. Hershey Co is currently generating about -0.1 per unit of risk. If you would invest 7,015 in Mondelez International on January 19, 2024 and sell it today you would lose (298.00) from holding Mondelez International or give up 4.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mondelez International vs. Hershey Co
Performance |
| Timeline |
| Mondelez International |
| Hershey |
Mondelez International and Hershey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mondelez International and Hershey
The main advantage of trading using opposite Mondelez International and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mondelez International 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.| Mondelez International vs. Chocoladefabriken Lindt Sprngli | Mondelez International vs. Barry Callebaut AG | Mondelez International vs. Tootsie Roll Industries | Mondelez International vs. Delfi Limited |
| Hershey vs. Chocoladefabriken Lindt Sprngli | Hershey vs. Barry Callebaut AG | Hershey vs. Tootsie Roll Industries | Hershey vs. Delfi Limited |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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