Correlation Between McCormick Company and Farmer Bros
Can any of the company-specific risk be diversified away by investing in both McCormick Company and Farmer Bros 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 Farmer Bros 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 Farmer Bros Co, you can compare the effects of market volatilities on McCormick Company and Farmer Bros 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 Farmer Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of McCormick Company and Farmer Bros.
Diversification Opportunities for McCormick Company and Farmer Bros
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McCormick and Farmer is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding McCormick Company Incorporated and Farmer Bros Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmer Bros 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 Farmer Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmer Bros has no effect on the direction of McCormick Company i.e., McCormick Company and Farmer Bros go up and down completely randomly.
Pair Corralation between McCormick Company and Farmer Bros
Considering the 90-day investment horizon McCormick Company Incorporated is expected to generate 0.57 times more return on investment than Farmer Bros. However, McCormick Company Incorporated is 1.75 times less risky than Farmer Bros. It trades about 0.0 of its potential returns per unit of risk. Farmer Bros Co is currently generating about -0.24 per unit of risk. If you would invest 7,561 in McCormick Company Incorporated on January 27, 2024 and sell it today you would lose (5.00) from holding McCormick Company Incorporated or give up 0.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McCormick Company Incorporated vs. Farmer Bros Co
Performance |
| Timeline |
| McCormick rporated |
| Farmer Bros |
McCormick Company and Farmer Bros Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McCormick Company and Farmer Bros
The main advantage of trading using opposite McCormick Company and Farmer Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McCormick Company position performs unexpectedly, Farmer Bros 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 Farmer Bros will offset losses from the drop in Farmer Bros' long position.| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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