Correlation Between McCormick Company and Grupo Bimbo
Can any of the company-specific risk be diversified away by investing in both McCormick Company and Grupo Bimbo 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 McCormick Company and Grupo Bimbo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McCormick Company Incorporated and Grupo Bimbo SAB, you can compare the effects of market volatilities on McCormick Company and Grupo Bimbo 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 McCormick Company with a short position of Grupo Bimbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and Grupo Bimbo.
Diversification Opportunities for McCormick Company and Grupo Bimbo
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between McCormick and Grupo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Grupo Bimbo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Bimbo SAB and McCormick Company 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 McCormick Company Incorporated are associated (or correlated) with Grupo Bimbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Bimbo SAB has no effect on the direction of McCormick Company i.e., McCormick Company and Grupo Bimbo go up and down completely randomly.
Pair Corralation between McCormick Company and Grupo Bimbo
Assuming the 90 days horizon McCormick Company Incorporated is expected to generate 0.34 times more return on investment than Grupo Bimbo. However, McCormick Company Incorporated is 2.93 times less risky than Grupo Bimbo. It trades about -0.05 of its potential returns per unit of risk. Grupo Bimbo SAB is currently generating about -0.08 per unit of risk. If you would invest 7,850 in McCormick Company Incorporated on September 1, 2024 and sell it today you would lose (101.00) from holding McCormick Company Incorporated or give up 1.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
McCormick Company Incorporated vs. Grupo Bimbo SAB
Performance |
| Timeline |
| McCormick Company |
| Grupo Bimbo SAB |
McCormick Company and Grupo Bimbo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McCormick Company and Grupo Bimbo
The main advantage of trading using opposite McCormick Company and Grupo Bimbo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company position performs unexpectedly, Grupo Bimbo 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 Grupo Bimbo will offset losses from the drop in Grupo Bimbo's long position.| McCormick Company vs. Central Garden Pet | McCormick Company vs. Seneca Foods Corp | McCormick Company vs. Natures Sunshine Products | McCormick Company vs. Seneca Foods Corp |
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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 the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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