Correlation Between McCormick Company and JM Smucker

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

Diversification Opportunities for McCormick Company and JM Smucker

0.78

Correlation Coefficient

McCormick Company  JM Smucker

Poor diversification

The 3 months correlation between McCormick and SJM is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and JM Smucker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Smucker 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 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 McCormick Company i.e., McCormick Company and JM Smucker go up and down completely randomly.

Pair Corralation between McCormick Company and JM Smucker

Considering the 90-day investment horizon McCormick Company is expected to generate 1.06 times less return on investment than JM Smucker. But when comparing it to its historical volatility, McCormick Company Incorporated is 1.2 times less risky than JM Smucker. It trades about 0.09 of its potential returns per unit of risk. JM Smucker is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,875  in JM Smucker on December 28, 2024 and sell it today you would earn a total of  798.00  from holding JM Smucker or generate 7.34% return on investment over 90 days.

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

McCormick Company Incorporated  vs.  JM Smucker

McCormick Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 6 (%) 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.

JM Smucker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JM Smucker are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward-looking indicators, JM Smucker may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with McCormick Company and JM Smucker

The main advantage of trading using opposite McCormick Company and JM Smucker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company 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 McCormick Company Incorporated 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.