Correlation Between Cal Maine and LPKF Laser

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Can any of the company-specific risk be diversified away by investing in both Cal Maine and LPKF Laser 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 LPKF Laser 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 LPKF Laser Electronics, you can compare the effects of market volatilities on Cal Maine and LPKF Laser 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 LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and LPKF Laser.

Diversification Opportunities for Cal Maine and LPKF Laser

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Cal and LPKF is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Cal Maine i.e., Cal Maine and LPKF Laser go up and down completely randomly.

Pair Corralation between Cal Maine and LPKF Laser

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 0.8 times more return on investment than LPKF Laser. However, Cal Maine Foods is 1.25 times less risky than LPKF Laser. It trades about 0.09 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.01 per unit of risk. If you would invest  4,481  in Cal Maine Foods on October 30, 2024 and sell it today you would earn a total of  5,894  from holding Cal Maine Foods or generate 131.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cal Maine Foods  vs.  LPKF Laser Electronics

 Performance 
       Timeline  
Cal Maine Foods 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Cal Maine unveiled solid returns over the last few months and may actually be approaching a breakup point.
LPKF Laser Electronics 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in LPKF Laser Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LPKF Laser may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cal Maine and LPKF Laser Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cal Maine and LPKF Laser

The main advantage of trading using opposite Cal Maine and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.
The idea behind Cal Maine Foods and LPKF Laser Electronics 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.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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