Correlation Between Hershey and Delfi

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

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

Diversification Opportunities for Hershey and Delfi

0.06

Correlation Coefficient

Hershey  Delfi

Significant diversification

The 3 months correlation between Hershey and Delfi is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Delfi Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delfi Limited 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 Delfi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delfi Limited has no effect on the direction of Hershey i.e., Hershey and Delfi go up and down completely randomly.

Pair Corralation between Hershey and Delfi

Considering the 90-day investment horizon Hershey Co is expected to under-perform the Delfi. But the stock apears to be less risky and, when comparing its historical volatility, Hershey Co is 1.69 times less risky than Delfi. The stock trades about -0.01 of its potential returns per unit of risk. The Delfi Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Delfi Limited on January 31, 2024 and sell it today you would earn a total of  22.00  from holding Delfi Limited or generate 46.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.51%
Values	Daily Returns

Hershey Co  vs.  Delfi Limited

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.

Delfi Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delfi Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hershey and Delfi

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

The idea behind Hershey Co and Delfi Limited 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 CEOs Directory module to screen CEOs from public companies around the world.