Correlation Between Lancaster Colony and JM Smucker

Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and JM Smucker 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 Lancaster Colony and JM Smucker into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lancaster Colony and JM Smucker, you can compare the effects of market volatilities on Lancaster Colony and JM Smucker 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 Lancaster Colony with a short position of JM Smucker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and JM Smucker.

Diversification Opportunities for Lancaster Colony and JM Smucker

-0.28

Correlation Coefficient

Lancaster Colony  JM Smucker

Very good diversification

The 3 months correlation between Lancaster and SJM is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and JM Smucker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Smucker and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with JM Smucker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Smucker has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and JM Smucker go up and down completely randomly.

Pair Corralation between Lancaster Colony and JM Smucker

Given the investment horizon of 90 days Lancaster Colony is expected to generate 1.21 times more return on investment than JM Smucker. However, Lancaster Colony is 1.21 times more volatile than JM Smucker. It trades about -0.08 of its potential returns per unit of risk. JM Smucker is currently generating about -0.24 per unit of risk. If you would invest  18,463  in Lancaster Colony on September 27, 2024 and sell it today you would lose (618.50) from holding Lancaster Colony or give up 3.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lancaster Colony  vs.  JM Smucker

Lancaster Colony

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancaster Colony has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

JM Smucker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Smucker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Lancaster Colony and JM Smucker

The main advantage of trading using opposite Lancaster Colony and JM Smucker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony position performs unexpectedly, JM Smucker 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 JM Smucker will offset losses from the drop in JM Smucker's long position.

The idea behind Lancaster Colony and JM Smucker pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.