Correlation Between So Martinho and Hershey

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

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

Diversification Opportunities for So Martinho and Hershey

0.52

Correlation Coefficient

So Martinho  Hershey

Very weak diversification

The 3 months correlation between SMTO3 and Hershey is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding So Martinho SA and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey and So Martinho 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 So Martinho SA 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 So Martinho i.e., So Martinho and Hershey go up and down completely randomly.

Pair Corralation between So Martinho and Hershey

Assuming the 90 days trading horizon So Martinho SA is expected to generate 1.55 times more return on investment than Hershey. However, So Martinho is 1.55 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  2,686  in So Martinho SA on September 4, 2024 and sell it today you would lose (165.00) from holding So Martinho SA or give up 6.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

So Martinho SA  vs.  Hershey Co

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.

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 So Martinho and Hershey

The main advantage of trading using opposite So Martinho and Hershey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if So Martinho 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 So Martinho SA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.