Correlation Between McCormick Company and Post Holdings
Can any of the company-specific risk be diversified away by investing in both McCormick Company and Post Holdings 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 Post Holdings 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 Post Holdings, you can compare the effects of market volatilities on McCormick Company and Post Holdings 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 Post Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and Post Holdings.
Diversification Opportunities for McCormick Company and Post Holdings
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McCormick and Post is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post Holdings 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 Post Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post Holdings has no effect on the direction of McCormick Company i.e., McCormick Company and Post Holdings go up and down completely randomly.
Pair Corralation between McCormick Company and Post Holdings
Considering the 90-day investment horizon McCormick Company is expected to generate 1.35 times less return on investment than Post Holdings. In addition to that, McCormick Company is 1.22 times more volatile than Post Holdings. It trades about 0.07 of its total potential returns per unit of risk. Post Holdings is currently generating about 0.11 per unit of volatility. If you would invest 10,511 in Post Holdings on August 30, 2024 and sell it today you would earn a total of 1,424 from holding Post Holdings or generate 13.55% 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. Post Holdings
Performance |
| Timeline |
| McCormick Company |
| Post Holdings |
McCormick Company and Post Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McCormick Company and Post Holdings
The main advantage of trading using opposite McCormick Company and Post Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company position performs unexpectedly, Post Holdings 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 Post Holdings will offset losses from the drop in Post Holdings' long position.| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
| Post Holdings vs. Simply Good Foods | Post Holdings vs. Treehouse Foods | Post Holdings vs. J J Snack | Post Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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