Correlation Between Hershey and So Martinho

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

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

Diversification Opportunities for Hershey and So Martinho

0.47

Correlation Coefficient

Hershey  So Martinho

Very weak diversification

The 3 months correlation between Hershey and SMTO3 is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and So Martinho SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Martinho SA 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 So Martinho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Martinho SA has no effect on the direction of Hershey i.e., Hershey and So Martinho go up and down completely randomly.

Pair Corralation between Hershey and So Martinho

Considering the 90-day investment horizon Hershey Co is expected to under-perform the So Martinho. But the stock apears to be less risky and, when comparing its historical volatility, Hershey Co is 1.01 times less risky than So Martinho. The stock trades about -0.03 of its potential returns per unit of risk. The So Martinho SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,582  in So Martinho SA on September 12, 2024 and sell it today you would lose (36.00) from holding So Martinho SA or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Hershey Co  vs.  So Martinho SA

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 latest stock price disturbance, may contribute to short-term losses for the investors.

So Martinho SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days So Martinho SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, So Martinho is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hershey and So Martinho

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

The idea behind Hershey Co and So Martinho SA 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 CEOs Directory module to screen CEOs from public companies around the world.