Correlation Between McCormick Company and WH Group

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

Diversification Opportunities for McCormick Company and WH Group

-0.65

Correlation Coefficient

McCormick Company  WH Group

Excellent diversification

The 3 months correlation between McCormick and WHGRF is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and WH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WH Group Limited 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 WH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WH Group Limited has no effect on the direction of McCormick Company i.e., McCormick Company and WH Group go up and down completely randomly.

Pair Corralation between McCormick Company and WH Group

Assuming the 90 days horizon McCormick Company Incorporated is expected to under-perform the WH Group. In addition to that, McCormick Company is 1.18 times more volatile than WH Group Limited. It trades about -0.05 of its total potential returns per unit of risk. WH Group Limited is currently generating about 0.16 per unit of volatility. If you would invest  71.00  in WH Group Limited on September 10, 2024 and sell it today you would earn a total of  8.00  from holding WH Group Limited or generate 11.27% return on investment over 90 days.

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

McCormick Company Incorporated  vs.  WH Group Limited

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.

WH Group Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WH Group Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, WH Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with McCormick Company and WH Group

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

The idea behind McCormick Company Incorporated and WH Group Limited 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.