Correlation Between Cal Maine and ARISTOCRAT LEISURE
Can any of the company-specific risk be diversified away by investing in both Cal Maine and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE, you can compare the effects of market volatilities on Cal Maine and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and ARISTOCRAT LEISURE.
Diversification Opportunities for Cal Maine and ARISTOCRAT LEISURE
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cal and ARISTOCRAT is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of Cal Maine i.e., Cal Maine and ARISTOCRAT LEISURE go up and down completely randomly.
Pair Corralation between Cal Maine and ARISTOCRAT LEISURE
Assuming the 90 days trading horizon Cal Maine is expected to generate 1.28 times less return on investment than ARISTOCRAT LEISURE. In addition to that, Cal Maine is 3.63 times more volatile than ARISTOCRAT LEISURE. It trades about 0.07 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.31 per unit of volatility. If you would invest 4,100 in ARISTOCRAT LEISURE on October 13, 2024 and sell it today you would earn a total of 200.00 from holding ARISTOCRAT LEISURE or generate 4.88% 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. ARISTOCRAT LEISURE
Performance |
| Timeline |
| Cal Maine Foods |
| ARISTOCRAT LEISURE |
Cal Maine and ARISTOCRAT LEISURE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and ARISTOCRAT LEISURE
The main advantage of trading using opposite Cal Maine and ARISTOCRAT LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE will offset losses from the drop in ARISTOCRAT LEISURE's long position.The idea behind Cal Maine Foods and ARISTOCRAT LEISURE 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.| ARISTOCRAT LEISURE vs. Austevoll Seafood ASA | ARISTOCRAT LEISURE vs. Harmony Gold Mining | ARISTOCRAT LEISURE vs. Cal Maine Foods | ARISTOCRAT LEISURE vs. COFCO Joycome 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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