Correlation Between Cal Maine and SolarEdge Technologies
Can any of the company-specific risk be diversified away by investing in both Cal Maine and SolarEdge Technologies 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 SolarEdge Technologies 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 SolarEdge Technologies, you can compare the effects of market volatilities on Cal Maine and SolarEdge Technologies 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 SolarEdge Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and SolarEdge Technologies.
Diversification Opportunities for Cal Maine and SolarEdge Technologies
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cal and SolarEdge is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies 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 SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of Cal Maine i.e., Cal Maine and SolarEdge Technologies go up and down completely randomly.
Pair Corralation between Cal Maine and SolarEdge Technologies
Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 0.21 times more return on investment than SolarEdge Technologies. However, Cal Maine Foods is 4.83 times less risky than SolarEdge Technologies. It trades about 0.5 of its potential returns per unit of risk. SolarEdge Technologies is currently generating about 0.07 per unit of risk. If you would invest 8,564 in Cal Maine Foods on September 15, 2024 and sell it today you would earn a total of 1,616 from holding Cal Maine Foods or generate 18.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cal Maine Foods vs. SolarEdge Technologies
Performance |
| Timeline |
| Cal Maine Foods |
| SolarEdge Technologies |
Cal Maine and SolarEdge Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and SolarEdge Technologies
The main advantage of trading using opposite Cal Maine and SolarEdge Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, SolarEdge Technologies 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 SolarEdge Technologies will offset losses from the drop in SolarEdge Technologies' long position.The idea behind Cal Maine Foods and SolarEdge Technologies 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.| SolarEdge Technologies vs. Commercial Vehicle Group | SolarEdge Technologies vs. Collins Foods Limited | SolarEdge Technologies vs. MOLSON RS BEVERAGE | SolarEdge Technologies vs. Cal Maine 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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