Correlation Between McCormick Company and Better Choice

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

Diversification Opportunities for McCormick Company and Better Choice

-0.5

Correlation Coefficient

McCormick Company  Better Choice

Very good diversification

The 3 months correlation between McCormick and Better is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice 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 Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of McCormick Company i.e., McCormick Company and Better Choice go up and down completely randomly.

Pair Corralation between McCormick Company and Better Choice

Considering the 90-day investment horizon McCormick Company Incorporated is expected to generate 0.08 times more return on investment than Better Choice. However, McCormick Company Incorporated is 12.84 times less risky than Better Choice. It trades about -0.32 of its potential returns per unit of risk. Better Choice is currently generating about -0.09 per unit of risk. If you would invest  7,629  in McCormick Company Incorporated on February 28, 2024 and sell it today you would lose (408.00) from holding McCormick Company Incorporated or give up 5.35% of portfolio value over 90 days.

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

McCormick Company Incorporated  vs.  Better Choice

McCormick Company

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 5 (%) 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 June 2024.

Better Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Better Choice 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 Better Choice

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

The idea behind McCormick Company Incorporated and Better Choice 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.