Correlation Between Nestle SA and McCormick Company
Can any of the company-specific risk be diversified away by investing in both Nestle 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 Nestle 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 Nestle SA and McCormick Company Incorporated, you can compare the effects of market volatilities on Nestle 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 Nestle SA with a short position of McCormick Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and McCormick Company.
Diversification Opportunities for Nestle SA and McCormick Company
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nestle and McCormick is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick rporated and Nestle 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 Nestle 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 rporated has no effect on the direction of Nestle SA i.e., Nestle SA and McCormick Company go up and down completely randomly.
Pair Corralation between Nestle SA and McCormick Company
Assuming the 90 days horizon Nestle SA is expected to under-perform the McCormick Company. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.4 times less risky than McCormick Company. The pink sheet trades about -0.01 of its potential returns per unit of risk. The McCormick Company Incorporated is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,304 in McCormick Company Incorporated on January 26, 2024 and sell it today you would earn a total of 1,281 from holding McCormick Company Incorporated or generate 20.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Nestle SA vs. McCormick Company Incorporated
Performance |
| Timeline |
| Nestle SA |
| McCormick rporated |
Nestle SA and McCormick Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and McCormick Company
The main advantage of trading using opposite Nestle SA and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle 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.| Nestle SA vs. Kellanova | Nestle SA vs. Lancaster Colony | Nestle SA vs. The A2 Milk | Nestle SA vs. Artisan Consumer Goods |
| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
Check out your portfolio center.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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