Correlation Between CAL MAINE and SWISS WATER
Can any of the company-specific risk be diversified away by investing in both CAL MAINE and SWISS WATER 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 SWISS WATER 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 SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on CAL MAINE and SWISS WATER 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 SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL MAINE and SWISS WATER.
Diversification Opportunities for CAL MAINE and SWISS WATER
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CAL and SWISS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE 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 SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of CAL MAINE i.e., CAL MAINE and SWISS WATER go up and down completely randomly.
Pair Corralation between CAL MAINE and SWISS WATER
Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 0.65 times more return on investment than SWISS WATER. However, CAL MAINE FOODS is 1.55 times less risky than SWISS WATER. It trades about 0.49 of its potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about -0.09 per unit of risk. If you would invest 8,488 in CAL MAINE FOODS on September 13, 2024 and sell it today you would earn a total of 1,338 from holding CAL MAINE FOODS or generate 15.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAL MAINE FOODS vs. SWISS WATER DECAFFCOFFEE
Performance |
| Timeline |
| CAL MAINE FOODS |
| SWISS WATER DECAFFCOFFEE |
CAL MAINE and SWISS WATER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAL MAINE and SWISS WATER
The main advantage of trading using opposite CAL MAINE and SWISS WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL MAINE position performs unexpectedly, SWISS WATER 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 SWISS WATER will offset losses from the drop in SWISS WATER's long position.The idea behind CAL MAINE FOODS and SWISS WATER DECAFFCOFFEE 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.| SWISS WATER vs. Japan Post Insurance | SWISS WATER vs. CAL MAINE FOODS | SWISS WATER vs. REVO INSURANCE SPA | SWISS WATER vs. JJ SNACK FOODS |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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