Correlation Between JM Smucker and Best Buy

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Can any of the company-specific risk be diversified away by investing in both JM Smucker and Best Buy 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 Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JM Smucker and Best Buy Co, you can compare the effects of market volatilities on JM Smucker and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of JM Smucker and Best Buy.

Diversification Opportunities for JM Smucker and Best Buy

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between SJM and Best is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of JM Smucker i.e., JM Smucker and Best Buy go up and down completely randomly.

Pair Corralation between JM Smucker and Best Buy

Considering the 90-day investment horizon JM Smucker is expected to generate 1.9 times less return on investment than Best Buy. But when comparing it to its historical volatility, JM Smucker is 1.4 times less risky than Best Buy. It trades about 0.1 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,811  in Best Buy Co on December 29, 2023 and sell it today you would earn a total of  376.00  from holding Best Buy Co or generate 4.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

JM Smucker  vs.  Best Buy Co

 Performance 
       Timeline  
JM Smucker 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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.
Best Buy 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in April 2024.

JM Smucker and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JM Smucker and Best Buy

The main advantage of trading using opposite JM Smucker and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
The idea behind JM Smucker and Best Buy Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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