Correlation Between JM Smucker and Danone PK

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

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

Diversification Opportunities for JM Smucker and Danone PK

-0.42

Correlation Coefficient

JM Smucker  Danone PK

Very good diversification

The 3 months correlation between SJM and Danone is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker and Danone PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone PK 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 Danone PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone PK has no effect on the direction of JM Smucker i.e., JM Smucker and Danone PK go up and down completely randomly.

Pair Corralation between JM Smucker and Danone PK

Considering the 90-day investment horizon JM Smucker is expected to under-perform the Danone PK. In addition to that, JM Smucker is 2.41 times more volatile than Danone PK. It trades about -0.1 of its total potential returns per unit of risk. Danone PK is currently generating about -0.14 per unit of volatility. If you would invest  1,293  in Danone PK on January 29, 2024 and sell it today you would lose (8.00) from holding Danone PK or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	15.91%
Values	Daily Returns

JM Smucker  vs.  Danone PK

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 fragile performance in the last few months, the Stock's forward-looking indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Danone PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with JM Smucker and Danone PK

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

The idea behind JM Smucker and Danone PK 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..