Correlation Between JBS SA and McCormick Company

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

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

Diversification Opportunities for JBS SA and McCormick Company

-0.42

Correlation Coefficient

JBS SA  McCormick Company

Very good diversification

The 3 months correlation between JBS and McCormick is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding JBS SA and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company and JBS SA 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 JBS SA 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 JBS SA i.e., JBS SA and McCormick Company go up and down completely randomly.

Pair Corralation between JBS SA and McCormick Company

Assuming the 90 days horizon JBS SA is expected to generate 1.79 times more return on investment than McCormick Company. However, JBS SA is 1.79 times more volatile than McCormick Company Incorporated. It trades about 0.07 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  1,202  in JBS SA on September 14, 2024 and sell it today you would earn a total of  94.00  from holding JBS SA or generate 7.82% return on investment over 90 days.

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

JBS SA  vs.  McCormick Company Incorporated

JBS SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, JBS SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 JBS SA and McCormick Company

The main advantage of trading using opposite JBS SA and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JBS SA 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 JBS SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.