Correlation Between Bellring Brands and McCormick Company

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

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

Diversification Opportunities for Bellring Brands and McCormick Company

-0.64

Correlation Coefficient

Bellring Brands  McCormick Company

Excellent diversification

The 3 months correlation between Bellring and McCormick is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bellring Brands LLC and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company and Bellring Brands 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 Bellring Brands LLC 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 Bellring Brands i.e., Bellring Brands and McCormick Company go up and down completely randomly.

Pair Corralation between Bellring Brands and McCormick Company

Given the investment horizon of 90 days Bellring Brands LLC is expected to generate 1.07 times more return on investment than McCormick Company. However, Bellring Brands is 1.07 times more volatile than McCormick Company Incorporated. It trades about 0.37 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about -0.04 per unit of risk. If you would invest  5,916  in Bellring Brands LLC on September 14, 2024 and sell it today you would earn a total of  1,883  from holding Bellring Brands LLC or generate 31.83% return on investment over 90 days.

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

Bellring Brands LLC  vs.  McCormick Company Incorporated

Bellring Brands LLC

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bellring Brands LLC are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, Bellring Brands reported solid returns over the last few months and may actually be approaching a breakup point.

McCormick Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McCormick Company Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, McCormick Company is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bellring Brands and McCormick Company

The main advantage of trading using opposite Bellring Brands and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellring Brands 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 Bellring Brands LLC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..