Correlation Between CAL MAINE and Townsquare Media
Can any of the company-specific risk be diversified away by investing in both CAL MAINE and Townsquare Media 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 Townsquare Media 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 Townsquare Media, you can compare the effects of market volatilities on CAL MAINE and Townsquare Media 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 Townsquare Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL MAINE and Townsquare Media.
Diversification Opportunities for CAL MAINE and Townsquare Media
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CAL and Townsquare is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of CAL MAINE i.e., CAL MAINE and Townsquare Media go up and down completely randomly.
Pair Corralation between CAL MAINE and Townsquare Media
Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 0.81 times more return on investment than Townsquare Media. However, CAL MAINE FOODS is 1.23 times less risky than Townsquare Media. It trades about 0.08 of its potential returns per unit of risk. Townsquare Media is currently generating about 0.05 per unit of risk. If you would invest 4,624 in CAL MAINE FOODS on September 5, 2024 and sell it today you would earn a total of 4,658 from holding CAL MAINE FOODS or generate 100.74% 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. Townsquare Media
Performance |
| Timeline |
| CAL MAINE FOODS |
| Townsquare Media |
CAL MAINE and Townsquare Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAL MAINE and Townsquare Media
The main advantage of trading using opposite CAL MAINE and Townsquare Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL MAINE position performs unexpectedly, Townsquare Media 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 Townsquare Media will offset losses from the drop in Townsquare Media's long position.The idea behind CAL MAINE FOODS and Townsquare Media 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.| Townsquare Media vs. CAL MAINE FOODS | Townsquare Media vs. TYSON FOODS A | Townsquare Media vs. United Natural Foods | Townsquare Media vs. Iridium Communications |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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