Correlation Between McCormick Company and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both McCormick Company and Lamb Weston 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 Lamb Weston 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 Lamb Weston Holdings, you can compare the effects of market volatilities on McCormick Company and Lamb Weston 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 Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and Lamb Weston.
Diversification Opportunities for McCormick Company and Lamb Weston
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between McCormick and Lamb is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings 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 Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of McCormick Company i.e., McCormick Company and Lamb Weston go up and down completely randomly.
Pair Corralation between McCormick Company and Lamb Weston
Considering the 90-day investment horizon McCormick Company Incorporated is expected to under-perform the Lamb Weston. But the etf apears to be less risky and, when comparing its historical volatility, McCormick Company Incorporated is 1.09 times less risky than Lamb Weston. The etf trades about -0.02 of its potential returns per unit of risk. The Lamb Weston Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,431 in Lamb Weston Holdings on January 24, 2024 and sell it today you would earn a total of 1,781 from holding Lamb Weston Holdings or generate 27.69% 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. Lamb Weston Holdings
Performance |
| Timeline |
| McCormick rporated |
| Lamb Weston Holdings |
McCormick Company and Lamb Weston Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McCormick Company and Lamb Weston
The main advantage of trading using opposite McCormick Company and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company position performs unexpectedly, Lamb Weston 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 Lamb Weston will offset losses from the drop in Lamb Weston's long position.| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
| Lamb Weston vs. Bunge Limited | Lamb Weston vs. Archer Daniels Midland | Lamb Weston vs. Fresh Del Monte | Lamb Weston vs. Limoneira Co |
Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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