Correlation Between NVIDIA and McCormick Company

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

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

Diversification Opportunities for NVIDIA and McCormick Company

-0.2

Correlation Coefficient

NVIDIA  McCormick Company

Good diversification

The 3 months correlation between NVIDIA and McCormick is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company and NVIDIA 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 NVIDIA are associated (or correlated) with McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick Company has no effect on the direction of NVIDIA i.e., NVIDIA and McCormick Company go up and down completely randomly.

Pair Corralation between NVIDIA and McCormick Company

Given the investment horizon of 90 days NVIDIA is expected to under-perform the McCormick Company. In addition to that, NVIDIA is 2.66 times more volatile than McCormick Company Incorporated. It trades about -0.01 of its total potential returns per unit of risk. McCormick Company Incorporated is currently generating about 0.04 per unit of volatility. If you would invest  7,457  in McCormick Company Incorporated on November 19, 2024 and sell it today you would earn a total of  212.00  from holding McCormick Company Incorporated or generate 2.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

NVIDIA  vs.  McCormick Company Incorporated

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

McCormick Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with NVIDIA and McCormick Company

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

The idea behind NVIDIA and McCormick Company Incorporated 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.