Correlation Between CAL MAINE and CN MODERN

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Can any of the company-specific risk be diversified away by investing in both CAL MAINE and CN MODERN 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 CN MODERN 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 CN MODERN DAIRY, you can compare the effects of market volatilities on CAL MAINE and CN MODERN 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 CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL MAINE and CN MODERN.

Diversification Opportunities for CAL MAINE and CN MODERN

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between CAL and 07M is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY 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 CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of CAL MAINE i.e., CAL MAINE and CN MODERN go up and down completely randomly.

Pair Corralation between CAL MAINE and CN MODERN

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 0.76 times more return on investment than CN MODERN. However, CAL MAINE FOODS is 1.32 times less risky than CN MODERN. It trades about 0.45 of its potential returns per unit of risk. CN MODERN DAIRY is currently generating about 0.12 per unit of risk. If you would invest  7,936  in CAL MAINE FOODS on September 4, 2024 and sell it today you would earn a total of  1,268  from holding CAL MAINE FOODS or generate 15.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

CAL MAINE FOODS  vs.  CN MODERN DAIRY

 Performance 
       Timeline  
CAL MAINE FOODS 

Risk-Adjusted Performance

27 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CAL MAINE exhibited solid returns over the last few months and may actually be approaching a breakup point.
CN MODERN DAIRY 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

CAL MAINE and CN MODERN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CAL MAINE and CN MODERN

The main advantage of trading using opposite CAL MAINE and CN MODERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL MAINE position performs unexpectedly, CN MODERN 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 CN MODERN will offset losses from the drop in CN MODERN's long position.
The idea behind CAL MAINE FOODS and CN MODERN DAIRY 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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