Correlation Between Hershey Foods and Tesla

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

Diversification Opportunities for Hershey Foods and Tesla

-0.17
  Correlation Coefficient

Good diversification

The 1 month correlation between Hershey and Tesla is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Foods Corp and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Hershey Foods i.e., Hershey Foods and Tesla go up and down completely randomly.

Pair Corralation between Hershey Foods and Tesla

Considering the 90-day investment horizon Hershey Foods is expected to generate 1.75 times less return on investment than Tesla. But when comparing it to its historical volatility, Hershey Foods Corp is 3.36 times less risky than Tesla. It trades about 0.08 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  14,963  in Tesla Inc on July 7, 2022 and sell it today you would earn a total of  8,735  from holding Tesla Inc or generate 58.38% return on investment over 90 days.
Time Period1 Month [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hershey Foods Corp  vs.  Tesla Inc

 Performance (%) 
       Timeline  
Hershey Foods Corp 
Hershey Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hershey Foods Corp are ranked lower than 4 (%) 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.

Hershey Price Channel

Tesla Inc 
Tesla Performance
0 of 100
Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Tesla Price Channel

Hershey Foods and Tesla Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hershey Foods and Tesla

The main advantage of trading using opposite Hershey Foods and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey Foods position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.
Hershey Foods vs. Starbucks Corp
The idea behind Hershey Foods Corp and Tesla Inc 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.
Tesla vs. Amazon Inc
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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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