Correlation Between Hershey Foods and Starbucks Corp

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Can any of the company-specific risk be diversified away by investing in both Hershey Foods and Starbucks Corp 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 Starbucks Corp 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 Starbucks Corp, you can compare the effects of market volatilities on Hershey Foods and Starbucks Corp 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 Starbucks Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hershey Foods and Starbucks Corp.

Diversification Opportunities for Hershey Foods and Starbucks Corp

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Hershey and Starbucks is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Foods Corp and Starbucks Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks Corp 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 Starbucks Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks Corp has no effect on the direction of Hershey Foods i.e., Hershey Foods and Starbucks Corp go up and down completely randomly.

Pair Corralation between Hershey Foods and Starbucks Corp

Considering the 90-day investment horizon Hershey Foods Corp is expected to under-perform the Starbucks Corp. But the stock apears to be less risky and, when comparing its historical volatility, Hershey Foods Corp is 1.68 times less risky than Starbucks Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Starbucks Corp is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  8,609  in Starbucks Corp on September 1, 2022 and sell it today you would earn a total of  1,611  from holding Starbucks Corp or generate 18.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hershey Foods Corp  vs.  Starbucks Corp

 Performance (%) 
       Timeline  
Hershey Foods Corp 
Hershey Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hershey Foods Corp are ranked lower than 3 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Hershey Price Channel

Starbucks Corp 
Starbucks Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Starbucks Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Starbucks Price Channel

Hershey Foods and Starbucks Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hershey Foods and Starbucks Corp

The main advantage of trading using opposite Hershey Foods and Starbucks Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey Foods position performs unexpectedly, Starbucks Corp 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 Starbucks Corp will offset losses from the drop in Starbucks Corp's long position.
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The idea behind Hershey Foods Corp and Starbucks Corp 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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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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