Correlation Between McCormick Company and Simply Good

Can any of the company-specific risk be diversified away by investing in both McCormick Company and Simply Good 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 Simply Good 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 Simply Good Foods, you can compare the effects of market volatilities on McCormick Company and Simply Good 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 Simply Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and Simply Good.

Diversification Opportunities for McCormick Company and Simply Good

-0.35

Correlation Coefficient

McCormick Company  Simply Good

Very good diversification

The 3 months correlation between McCormick and Simply is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Simply Good Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simply Good Foods 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 Simply Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simply Good Foods has no effect on the direction of McCormick Company i.e., McCormick Company and Simply Good go up and down completely randomly.

Pair Corralation between McCormick Company and Simply Good

Assuming the 90 days horizon McCormick Company is expected to generate 1.32 times less return on investment than Simply Good. In addition to that, McCormick Company is 1.13 times more volatile than Simply Good Foods. It trades about 0.01 of its total potential returns per unit of risk. Simply Good Foods is currently generating about 0.01 per unit of volatility. If you would invest  3,795  in Simply Good Foods on September 19, 2024 and sell it today you would earn a total of  111.00  from holding Simply Good Foods or generate 2.92% return on investment over 90 days.

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

McCormick Company Incorporated  vs.  Simply Good Foods

McCormick Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McCormick Company Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, McCormick Company is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Simply Good Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Good Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Simply Good disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McCormick Company and Simply Good

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

The idea behind McCormick Company Incorporated and Simply Good Foods 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.