Correlation Between Cal Maine and TREE
Can any of the company-specific risk be diversified away by investing in both Cal Maine and TREE 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 TREE 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 TREECOM, you can compare the effects of market volatilities on Cal Maine and TREE 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 TREE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and TREE.
Diversification Opportunities for Cal Maine and TREE
Pay attention - limited upside
The 3 months correlation between Cal and TREE is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and TREECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TREECOM 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 TREE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TREECOM has no effect on the direction of Cal Maine i.e., Cal Maine and TREE go up and down completely randomly.
Pair Corralation between Cal Maine and TREE
Assuming the 90 days trading horizon Cal Maine is expected to generate 1.31 times less return on investment than TREE. In addition to that, Cal Maine is 1.09 times more volatile than TREECOM. It trades about 0.2 of its total potential returns per unit of risk. TREECOM is currently generating about 0.28 per unit of volatility. If you would invest 3,677 in TREECOM on October 24, 2024 and sell it today you would earn a total of 547.00 from holding TREECOM or generate 14.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cal Maine Foods vs. TREECOM
Performance |
| Timeline |
| Cal Maine Foods |
| TREECOM |
Cal Maine and TREE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and TREE
The main advantage of trading using opposite Cal Maine and TREE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, TREE 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 TREE will offset losses from the drop in TREE's long position.| Cal Maine vs. ANTA SPORTS PRODUCT | Cal Maine vs. Flutter Entertainment PLC | Cal Maine vs. HANOVER INSURANCE | Cal Maine vs. SBI Insurance Group |
| TREE vs. TAL Education Group | TREE vs. SENECA FOODS A | TREE vs. STRAYER EDUCATION | TREE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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