Correlation Between Cal Maine and Global Clean
Can any of the company-specific risk be diversified away by investing in both Cal Maine and Global Clean 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 Cal Maine and Global Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cal Maine Foods and Global Clean Energy, you can compare the effects of market volatilities on Cal Maine and Global Clean 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 Cal Maine with a short position of Global Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Global Clean.
Diversification Opportunities for Cal Maine and Global Clean
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cal and Global is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Global Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Clean Energy and Cal Maine 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 Cal Maine Foods are associated (or correlated) with Global Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Clean Energy has no effect on the direction of Cal Maine i.e., Cal Maine and Global Clean go up and down completely randomly.
Pair Corralation between Cal Maine and Global Clean
Given the investment horizon of 90 days Cal Maine is expected to generate 3.5 times less return on investment than Global Clean. But when comparing it to its historical volatility, Cal Maine Foods is 7.27 times less risky than Global Clean. It trades about 0.29 of its potential returns per unit of risk. Global Clean Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 46.00 in Global Clean Energy on August 25, 2024 and sell it today you would earn a total of 41.00 from holding Global Clean Energy or generate 89.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cal Maine Foods vs. Global Clean Energy
Performance |
| Timeline |
| Cal Maine Foods |
| Global Clean Energy |
Cal Maine and Global Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and Global Clean
The main advantage of trading using opposite Cal Maine and Global Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, Global Clean 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 Global Clean will offset losses from the drop in Global Clean's long position.| Cal Maine vs. Bunge Limited | Cal Maine vs. Tyson Foods | Cal Maine vs. Dole PLC | Cal Maine vs. Adecoagro SA |
| Global Clean vs. Embotelladora Andina SA | Global Clean vs. Signet International Holdings | Global Clean vs. National Beverage Corp | Global Clean vs. PT Astra International |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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