Correlation Between Hershey and Unum

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

Diversification Opportunities for Hershey and Unum

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hershey and Unum is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hershey Co and Unum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unum Group 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 Unum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unum Group has no effect on the direction of Hershey i.e., Hershey and Unum go up and down completely randomly.

Pair Corralation between Hershey and Unum

Considering the 90-day investment horizon Hershey is expected to generate 1.65 times less return on investment than Unum. But when comparing it to its historical volatility, Hershey Co is 2.03 times less risky than Unum. It trades about 0.09 of its potential returns per unit of risk. Unum Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,069  in Unum Group on September 3, 2022 and sell it today you would earn a total of  2,194  from holding Unum Group or generate 106.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hershey Co  vs.  Unum Group

 Performance (%) 
       Timeline  
Hershey 
Hershey Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hershey Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Hershey Price Channel

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

Unum Price Channel

Hershey and Unum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hershey and Unum

The main advantage of trading using opposite Hershey and Unum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hershey position performs unexpectedly, Unum 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 Unum will offset losses from the drop in Unum's long position.
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The idea behind Hershey Co and Unum Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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