Correlation Between JM Smucker and McCormick Company
Can any of the company-specific risk be diversified away by investing in both JM Smucker 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 JM Smucker and McCormick Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JM Smucker and McCormick Company Incorporated, you can compare the effects of market volatilities on JM Smucker 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 JM Smucker with a short position of McCormick Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of JM Smucker and McCormick Company.
Diversification Opportunities for JM Smucker and McCormick Company
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SJM and McCormick is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company and JM Smucker 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 JM Smucker 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 JM Smucker i.e., JM Smucker and McCormick Company go up and down completely randomly.
Pair Corralation between JM Smucker and McCormick Company
Considering the 90-day investment horizon JM Smucker is expected to under-perform the McCormick Company. But the stock apears to be less risky and, when comparing its historical volatility, JM Smucker is 1.06 times less risky than McCormick Company. The stock trades about -0.03 of its potential returns per unit of risk. The McCormick Company Incorporated is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6,903 in McCormick Company Incorporated on November 1, 2024 and sell it today you would earn a total of 875.00 from holding McCormick Company Incorporated or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JM Smucker vs. McCormick Company Incorporated
Performance |
| Timeline |
| JM Smucker |
| McCormick Company |
JM Smucker and McCormick Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JM Smucker and McCormick Company
The main advantage of trading using opposite JM Smucker and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker 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.| JM Smucker vs. ConAgra Foods | JM Smucker vs. Kellanova | JM Smucker vs. General Mills | JM Smucker vs. Hormel Foods |
| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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