Correlation Between Cal Maine and LION ONE
Can any of the company-specific risk be diversified away by investing in both Cal Maine and LION ONE 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 LION ONE 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 LION ONE METALS, you can compare the effects of market volatilities on Cal Maine and LION ONE 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 LION ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and LION ONE.
Diversification Opportunities for Cal Maine and LION ONE
Good diversification
The 3 months correlation between Cal and LION is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and LION ONE METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LION ONE METALS 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 LION ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LION ONE METALS has no effect on the direction of Cal Maine i.e., Cal Maine and LION ONE go up and down completely randomly.
Pair Corralation between Cal Maine and LION ONE
Assuming the 90 days horizon Cal Maine Foods is expected to generate 0.37 times more return on investment than LION ONE. However, Cal Maine Foods is 2.74 times less risky than LION ONE. It trades about 0.37 of its potential returns per unit of risk. LION ONE METALS is currently generating about -0.15 per unit of risk. If you would invest 8,416 in Cal Maine Foods on September 12, 2024 and sell it today you would earn a total of 1,152 from holding Cal Maine Foods or generate 13.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cal Maine Foods vs. LION ONE METALS
Performance |
| Timeline |
| Cal Maine Foods |
| LION ONE METALS |
Cal Maine and LION ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and LION ONE
The main advantage of trading using opposite Cal Maine and LION ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, LION ONE 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 LION ONE will offset losses from the drop in LION ONE's long position.| Cal Maine vs. Magnachip Semiconductor | Cal Maine vs. CARSALESCOM | Cal Maine vs. SINGAPORE AIRLINES | Cal Maine vs. NXP Semiconductors NV |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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