Correlation Between McCormick Company and Darling Ingredients

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

Diversification Opportunities for McCormick Company and Darling Ingredients

-0.41

Correlation Coefficient

McCormick Company  Darling Ingredients

Very good diversification

The 3 months correlation between McCormick and Darling is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Darling Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darling Ingredients 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 Darling Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darling Ingredients has no effect on the direction of McCormick Company i.e., McCormick Company and Darling Ingredients go up and down completely randomly.

Pair Corralation between McCormick Company and Darling Ingredients

Considering the 90-day investment horizon McCormick Company Incorporated is expected to generate 0.51 times more return on investment than Darling Ingredients. However, McCormick Company Incorporated is 1.96 times less risky than Darling Ingredients. It trades about 0.09 of its potential returns per unit of risk. Darling Ingredients is currently generating about -0.01 per unit of risk. If you would invest  7,545  in McCormick Company Incorporated on December 29, 2024 and sell it today you would earn a total of  601.00  from holding McCormick Company Incorporated or generate 7.97% return on investment over 90 days.

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

McCormick Company Incorporated  vs.  Darling Ingredients

McCormick Company

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, McCormick Company may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Darling Ingredients

Risk-Adjusted Performance

Very Weak

Over the last 90 days Darling Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Darling Ingredients is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with McCormick Company and Darling Ingredients

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

The idea behind McCormick Company Incorporated and Darling Ingredients 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 Commodity Directory module to find actively traded commodities issued by global exchanges.