Correlation Between JM Smucker and Rocky Mountain

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

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

Diversification Opportunities for JM Smucker and Rocky Mountain

-0.56

Correlation Coefficient

JM Smucker  Rocky Mountain

Excellent diversification

The 3 months correlation between SJM and Rocky is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Chocolate has no effect on the direction of JM Smucker i.e., JM Smucker and Rocky Mountain go up and down completely randomly.

Pair Corralation between JM Smucker and Rocky Mountain

Considering the 90-day investment horizon JM Smucker is expected to under-perform the Rocky Mountain. But the stock apears to be less risky and, when comparing its historical volatility, JM Smucker is 3.22 times less risky than Rocky Mountain. The stock trades about -0.04 of its potential returns per unit of risk. The Rocky Mountain Chocolate is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  178.00  in Rocky Mountain Chocolate on September 5, 2024 and sell it today you would earn a total of  108.00  from holding Rocky Mountain Chocolate or generate 60.67% return on investment over 90 days.

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

JM Smucker  vs.  Rocky Mountain Chocolate

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.

Rocky Mountain Chocolate

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Chocolate are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Rocky Mountain reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JM Smucker and Rocky Mountain

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

The idea behind JM Smucker and Rocky Mountain Chocolate 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.