Correlation Between JM Smucker and Federal Home

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Can any of the company-specific risk be diversified away by investing in both JM Smucker and Federal Home 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 JM Smucker and Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JM Smucker and Federal Home Loan, you can compare the effects of market volatilities on JM Smucker and Federal Home 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 JM Smucker with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of JM Smucker and Federal Home.

Diversification Opportunities for JM Smucker and Federal Home

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between SJM and Federal is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and JM Smucker 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 JM Smucker are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of JM Smucker i.e., JM Smucker and Federal Home go up and down completely randomly.

Pair Corralation between JM Smucker and Federal Home

Considering the 90-day investment horizon JM Smucker is expected to generate 5.52 times less return on investment than Federal Home. But when comparing it to its historical volatility, JM Smucker is 2.06 times less risky than Federal Home. It trades about 0.1 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  531.00  in Federal Home Loan on December 29, 2023 and sell it today you would earn a total of  79.00  from holding Federal Home Loan or generate 14.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

JM Smucker  vs.  Federal Home Loan

 Performance 
       Timeline  
JM Smucker 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days JM Smucker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, JM Smucker is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Federal Home Loan 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Federal Home unveiled solid returns over the last few months and may actually be approaching a breakup point.

JM Smucker and Federal Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JM Smucker and Federal Home

The main advantage of trading using opposite JM Smucker and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.
The idea behind JM Smucker and Federal Home Loan 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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