Correlation Between Hershey Foods and Kellogg

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Can any of the company-specific risk be diversified away by investing in both Hershey Foods and Kellogg 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 Foods and Kellogg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hershey Foods Corp and Kellogg Company, you can compare the effects of market volatilities on Hershey Foods and Kellogg 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 Foods with a short position of Kellogg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey Foods and Kellogg.

Diversification Opportunities for Hershey Foods and Kellogg

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Hershey and Kellogg is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Foods Corp and Kellogg Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellogg Company and Hershey Foods 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 Foods Corp are associated (or correlated) with Kellogg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellogg Company has no effect on the direction of Hershey Foods i.e., Hershey Foods and Kellogg go up and down completely randomly.

Pair Corralation between Hershey Foods and Kellogg

Considering the 90-day investment horizon Hershey Foods Corp is expected to generate 1.33 times more return on investment than Kellogg. However, Hershey Foods is 1.33 times more volatile than Kellogg Company. It trades about 0.16 of its potential returns per unit of risk. Kellogg Company is currently generating about 0.09 per unit of risk. If you would invest  21,171  in Hershey Foods Corp on March 30, 2022 and sell it today you would earn a total of  925.00  from holding Hershey Foods Corp or generate 4.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hershey Foods Corp  vs.  Kellogg Company

 Performance (%) 
      Timeline 
Hershey Foods Corp 
Hershey Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hershey Foods Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Hershey Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0163
Payout Ratio
0.46
Last Split Factor
2:1
Forward Annual Dividend Rate
3.6
Dividend Date
2022-06-15
Ex Dividend Date
2022-05-19
Last Split Date
2004-06-16

Hershey Price Channel

Kellogg Company 
Kellogg Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kellogg Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward-looking signals, Kellogg may actually be approaching a critical reversion point that can send shares even higher in July 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0342
Payout Ratio
0.56
Last Split Factor
2:1
Forward Annual Dividend Rate
2.32
Dividend Date
2022-06-15
Ex Dividend Date
2022-05-31
Last Split Date
1997-08-25

Kellogg Price Channel

Hershey Foods and Kellogg Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Hershey Foods and Kellogg

The main advantage of trading using opposite Hershey Foods and Kellogg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey Foods position performs unexpectedly, Kellogg 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 Kellogg will offset losses from the drop in Kellogg's long position.
The idea behind Hershey Foods Corp and Kellogg Company 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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