Correlation Between Barry Callebaut and Hershey

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

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

Diversification Opportunities for Barry Callebaut and Hershey

0.6

Correlation Coefficient

Barry Callebaut  Hershey

Poor diversification

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

Pair Corralation between Barry Callebaut and Hershey

Assuming the 90 days horizon Barry Callebaut AG is expected to generate 2.15 times more return on investment than Hershey. However, Barry Callebaut is 2.15 times more volatile than Hershey Co. It trades about -0.04 of its potential returns per unit of risk. Hershey Co is currently generating about -0.11 per unit of risk. If you would invest  1,647  in Barry Callebaut AG on September 4, 2024 and sell it today you would lose (148.00) from holding Barry Callebaut AG or give up 8.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Barry Callebaut AG  vs.  Hershey Co

Barry Callebaut AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barry Callebaut AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Barry Callebaut and Hershey

The main advantage of trading using opposite Barry Callebaut and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barry Callebaut 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 Barry Callebaut AG 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.