Correlation Between McCormick Company and BRF SA
Can any of the company-specific risk be diversified away by investing in both McCormick Company and BRF SA 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 BRF SA 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 BRF SA ADR, you can compare the effects of market volatilities on McCormick Company and BRF SA 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 BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and BRF SA.
Diversification Opportunities for McCormick Company and BRF SA
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McCormick and BRF is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR 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 BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA ADR has no effect on the direction of McCormick Company i.e., McCormick Company and BRF SA go up and down completely randomly.
Pair Corralation between McCormick Company and BRF SA
Considering the 90-day investment horizon McCormick Company Incorporated is expected to generate 0.67 times more return on investment than BRF SA. However, McCormick Company Incorporated is 1.48 times less risky than BRF SA. It trades about 0.06 of its potential returns per unit of risk. BRF SA ADR is currently generating about -0.16 per unit of risk. If you would invest 7,588 in McCormick Company Incorporated on November 3, 2024 and sell it today you would earn a total of 135.00 from holding McCormick Company Incorporated or generate 1.78% 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. BRF SA ADR
Performance |
| Timeline |
| McCormick Company |
| BRF SA ADR |
McCormick Company and BRF SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McCormick Company and BRF SA
The main advantage of trading using opposite McCormick Company and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company position performs unexpectedly, BRF SA 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 BRF SA will offset losses from the drop in BRF SA's long position.| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
| BRF SA vs. Marfrig Global Foods | BRF SA vs. Pilgrims Pride Corp | BRF SA vs. John B Sanfilippo | BRF SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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