Correlation Between Dow Jones and McCormick Company
Can any of the company-specific risk be diversified away by investing in both Dow Jones and McCormick Company 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 Dow Jones and McCormick Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and McCormick Company Incorporated, you can compare the effects of market volatilities on Dow Jones and McCormick Company 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 Dow Jones with a short position of McCormick Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and McCormick Company.
Diversification Opportunities for Dow Jones and McCormick Company
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and McCormick is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick Company has no effect on the direction of Dow Jones i.e., Dow Jones and McCormick Company go up and down completely randomly.
Pair Corralation between Dow Jones and McCormick Company
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.53 times more return on investment than McCormick Company. However, Dow Jones Industrial is 1.9 times less risky than McCormick Company. It trades about 0.11 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about 0.06 per unit of risk. If you would invest 3,815,030 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 658,627 from holding Dow Jones Industrial or generate 17.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. McCormick Company Incorporated
Performance |
| Timeline |
Dow Jones and McCormick Company Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
McCormick Company Incorporated
Pair trading matchups for McCormick Company
Pair Trading with Dow Jones and McCormick Company
The main advantage of trading using opposite Dow Jones and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, McCormick Company 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 McCormick Company will offset losses from the drop in McCormick Company's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
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 the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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