Correlation Between McCormick Company and John B
Can any of the company-specific risk be diversified away by investing in both McCormick Company and John B 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 John B 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 John B Sanfilippo, you can compare the effects of market volatilities on McCormick Company and John B 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 John B. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and John B.
Diversification Opportunities for McCormick Company and John B
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McCormick and John is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and John B Sanfilippo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John B Sanfilippo 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 John B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John B Sanfilippo has no effect on the direction of McCormick Company i.e., McCormick Company and John B go up and down completely randomly.
Pair Corralation between McCormick Company and John B
Assuming the 90 days horizon McCormick Company Incorporated is expected to generate 0.88 times more return on investment than John B. However, McCormick Company Incorporated is 1.13 times less risky than John B. It trades about 0.06 of its potential returns per unit of risk. John B Sanfilippo is currently generating about -0.07 per unit of risk. If you would invest 7,061 in McCormick Company Incorporated on August 30, 2024 and sell it today you would earn a total of 733.00 from holding McCormick Company Incorporated or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McCormick Company Incorporated vs. John B Sanfilippo
Performance |
| Timeline |
| McCormick Company |
| John B Sanfilippo |
McCormick Company and John B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McCormick Company and John B
The main advantage of trading using opposite McCormick Company and John B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company position performs unexpectedly, John B 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 John B will offset losses from the drop in John B'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 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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