Correlation Between JM Smucker and Ingredion Incorporated

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

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

Diversification Opportunities for JM Smucker and Ingredion Incorporated

-0.34

Correlation Coefficient

JM Smucker  Ingredion Incorporated

Very good diversification

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

Pair Corralation between JM Smucker and Ingredion Incorporated

Considering the 90-day investment horizon JM Smucker is expected to generate 15.6 times less return on investment than Ingredion Incorporated. But when comparing it to its historical volatility, JM Smucker is 1.67 times less risky than Ingredion Incorporated. It trades about 0.01 of its potential returns per unit of risk. Ingredion Incorporated is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,385  in Ingredion Incorporated on September 4, 2024 and sell it today you would earn a total of  1,426  from holding Ingredion Incorporated or generate 10.65% return on investment over 90 days.

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

JM Smucker  vs.  Ingredion Incorporated

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.

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.

Pair Trading with JM Smucker and Ingredion Incorporated

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

The idea behind JM Smucker and Ingredion 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.