Correlation Between CAL MAINE and S A P
Can any of the company-specific risk be diversified away by investing in both CAL MAINE and S A P 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 S A P 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 SAP SE, you can compare the effects of market volatilities on CAL MAINE and S A P 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 S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL MAINE and S A P.
Diversification Opportunities for CAL MAINE and S A P
Almost no diversification
The 3 months correlation between CAL and SAP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of CAL MAINE i.e., CAL MAINE and S A P go up and down completely randomly.
Pair Corralation between CAL MAINE and S A P
Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.25 times more return on investment than S A P. However, CAL MAINE is 1.25 times more volatile than SAP SE. It trades about 0.33 of its potential returns per unit of risk. SAP SE is currently generating about 0.04 per unit of risk. If you would invest 8,154 in CAL MAINE FOODS on August 28, 2024 and sell it today you would earn a total of 1,000.00 from holding CAL MAINE FOODS or generate 12.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAL MAINE FOODS vs. SAP SE
Performance |
| Timeline |
| CAL MAINE FOODS |
| SAP SE |
CAL MAINE and S A P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAL MAINE and S A P
The main advantage of trading using opposite CAL MAINE and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL MAINE position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.| CAL MAINE vs. VIAPLAY GROUP AB | CAL MAINE vs. USWE SPORTS AB | CAL MAINE vs. PARKEN Sport Entertainment | CAL MAINE vs. Playa Hotels Resorts |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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