Correlation Between Cal Maine and Mount Gibson
Can any of the company-specific risk be diversified away by investing in both Cal Maine and Mount Gibson 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 Mount Gibson 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 Mount Gibson Iron, you can compare the effects of market volatilities on Cal Maine and Mount Gibson 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 Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Mount Gibson.
Diversification Opportunities for Cal Maine and Mount Gibson
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cal and Mount is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron 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 Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Cal Maine i.e., Cal Maine and Mount Gibson go up and down completely randomly.
Pair Corralation between Cal Maine and Mount Gibson
Assuming the 90 days trading horizon Cal Maine is expected to generate 1.81 times less return on investment than Mount Gibson. But when comparing it to its historical volatility, Cal Maine Foods is 1.2 times less risky than Mount Gibson. It trades about 0.06 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Mount Gibson Iron on November 3, 2024 and sell it today you would earn a total of 1.00 from holding Mount Gibson Iron or generate 5.88% 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. Mount Gibson Iron
Performance |
| Timeline |
| Cal Maine Foods |
| Mount Gibson Iron |
Cal Maine and Mount Gibson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and Mount Gibson
The main advantage of trading using opposite Cal Maine and Mount Gibson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, Mount Gibson 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 Mount Gibson will offset losses from the drop in Mount Gibson's long position.| Cal Maine vs. VITEC SOFTWARE GROUP | Cal Maine vs. Guidewire Software | Cal Maine vs. Check Point Software | Cal Maine vs. USU Software AG |
| Mount Gibson vs. ArcelorMittal SA | Mount Gibson vs. Steel Dynamics | Mount Gibson vs. Nippon Steel | Mount Gibson vs. NIPPON STEEL SPADR |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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