Correlation Between CAL-MAINE FOODS and China Construction
Can any of the company-specific risk be diversified away by investing in both CAL-MAINE FOODS and China Construction 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 FOODS and China Construction 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 China Construction Bank, you can compare the effects of market volatilities on CAL-MAINE FOODS and China Construction 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 FOODS with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL-MAINE FOODS and China Construction.
Diversification Opportunities for CAL-MAINE FOODS and China Construction
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CAL-MAINE and China is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank and CAL-MAINE FOODS 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 China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of CAL-MAINE FOODS i.e., CAL-MAINE FOODS and China Construction go up and down completely randomly.
Pair Corralation between CAL-MAINE FOODS and China Construction
Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 0.82 times more return on investment than China Construction. However, CAL MAINE FOODS is 1.22 times less risky than China Construction. It trades about 0.11 of its potential returns per unit of risk. China Construction Bank is currently generating about 0.03 per unit of risk. If you would invest 4,183 in CAL MAINE FOODS on September 1, 2024 and sell it today you would earn a total of 4,957 from holding CAL MAINE FOODS or generate 118.5% 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. China Construction Bank
Performance |
| Timeline |
| CAL MAINE FOODS |
| China Construction Bank |
CAL-MAINE FOODS and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAL-MAINE FOODS and China Construction
The main advantage of trading using opposite CAL-MAINE FOODS and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL-MAINE FOODS position performs unexpectedly, China Construction 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 China Construction will offset losses from the drop in China Construction's long position.| CAL-MAINE FOODS vs. Gold Road Resources | CAL-MAINE FOODS vs. Transportadora de Gas | CAL-MAINE FOODS vs. GOLD ROAD RES | CAL-MAINE FOODS vs. Air Transport Services |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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