Correlation Between Axon Enterprise and Hershey

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

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

Diversification Opportunities for Axon Enterprise and Hershey

-0.6

Correlation Coefficient

Axon Enterprise  Hershey

Excellent diversification

The 3 months correlation between Axon and Hershey is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and Axon Enterprise 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 Axon Enterprise 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 Axon Enterprise i.e., Axon Enterprise and Hershey go up and down completely randomly.

Pair Corralation between Axon Enterprise and Hershey

Assuming the 90 days trading horizon Axon Enterprise is expected to generate 0.69 times more return on investment than Hershey. However, Axon Enterprise is 1.46 times less risky than Hershey. It trades about 0.14 of its potential returns per unit of risk. Hershey Co is currently generating about 0.08 per unit of risk. If you would invest  60,345  in Axon Enterprise on September 18, 2024 and sell it today you would earn a total of  3,925  from holding Axon Enterprise or generate 6.5% return on investment over 90 days.

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

Axon Enterprise  vs.  Hershey Co

Axon Enterprise

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axon Enterprise unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Axon Enterprise and Hershey

The main advantage of trading using opposite Axon Enterprise and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axon Enterprise 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 Axon Enterprise 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.