Correlation Between Houston Natural and McCormick Company
Can any of the company-specific risk be diversified away by investing in both Houston Natural 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 Houston Natural and McCormick Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Houston Natural Resources and McCormick Company Incorporated, you can compare the effects of market volatilities on Houston Natural 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 Houston Natural with a short position of McCormick Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Houston Natural and McCormick Company.
Diversification Opportunities for Houston Natural and McCormick Company
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Houston and McCormick is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Houston Natural Resources and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company and Houston Natural 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 Houston Natural Resources 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 Houston Natural i.e., Houston Natural and McCormick Company go up and down completely randomly.
Pair Corralation between Houston Natural and McCormick Company
Given the investment horizon of 90 days Houston Natural Resources is expected to generate 19.21 times more return on investment than McCormick Company. However, Houston Natural is 19.21 times more volatile than McCormick Company Incorporated. It trades about 0.04 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about -0.08 per unit of risk. If you would invest 2.40 in Houston Natural Resources on August 28, 2024 and sell it today you would lose (0.70) from holding Houston Natural Resources or give up 29.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Houston Natural Resources vs. McCormick Company Incorporated
Performance |
| Timeline |
| Houston Natural Resources |
| McCormick Company |
Houston Natural and McCormick Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Houston Natural and McCormick Company
The main advantage of trading using opposite Houston Natural and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Houston Natural 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.| Houston Natural vs. Republic Services | Houston Natural vs. Waste Connections | Houston Natural vs. Clean Harbors | Houston Natural vs. Gfl Environmental Holdings |
| McCormick Company vs. Central Garden Pet | McCormick Company vs. Natures Sunshine Products | McCormick Company vs. Seneca Foods Corp | McCormick Company vs. Central Garden Pet |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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