Correlation Between Ingredion Incorporated and JM Smucker

Can any of the company-specific risk be diversified away by investing in both Ingredion Incorporated and JM Smucker 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 Ingredion Incorporated and JM Smucker into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ingredion Incorporated and JM Smucker

-0.34

Correlation Coefficient

Ingredion Incorporated  JM Smucker

Very good diversification

The 3 months correlation between Ingredion and SJM is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ingredion Incorporated and JM Smucker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Smucker and Ingredion Incorporated 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 Ingredion Incorporated are associated (or correlated) with JM Smucker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Smucker has no effect on the direction of Ingredion Incorporated i.e., Ingredion Incorporated and JM Smucker go up and down completely randomly.

Pair Corralation between Ingredion Incorporated and JM Smucker

Given the investment horizon of 90 days Ingredion Incorporated is expected to generate 1.03 times more return on investment than JM Smucker. However, Ingredion Incorporated is 1.03 times more volatile than JM Smucker. It trades about 0.07 of its potential returns per unit of risk. JM Smucker is currently generating about -0.02 per unit of risk. If you would invest  9,459  in Ingredion Incorporated on September 4, 2024 and sell it today you would earn a total of  5,452  from holding Ingredion Incorporated or generate 57.64% return on investment over 90 days.

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

Ingredion Incorporated  vs.  JM Smucker

Ingredion Incorporated

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ingredion Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Ingredion Incorporated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JM Smucker

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Ingredion Incorporated and JM Smucker

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

The idea behind Ingredion Incorporated and JM Smucker 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.