Correlation Between Cal Maine and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Cal Maine and Webster Financial 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 Webster Financial 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 Webster Financial, you can compare the effects of market volatilities on Cal Maine and Webster Financial 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 Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Webster Financial.
Diversification Opportunities for Cal Maine and Webster Financial
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cal and Webster is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of Cal Maine i.e., Cal Maine and Webster Financial go up and down completely randomly.
Pair Corralation between Cal Maine and Webster Financial
Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 0.86 times more return on investment than Webster Financial. However, Cal Maine Foods is 1.16 times less risky than Webster Financial. It trades about 0.07 of its potential returns per unit of risk. Webster Financial is currently generating about 0.04 per unit of risk. If you would invest 4,797 in Cal Maine Foods on September 3, 2024 and sell it today you would earn a total of 4,343 from holding Cal Maine Foods or generate 90.54% 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. Webster Financial
Performance |
| Timeline |
| Cal Maine Foods |
| Webster Financial |
Cal Maine and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and Webster Financial
The main advantage of trading using opposite Cal Maine and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial's long position.| Cal Maine vs. ADRIATIC METALS LS 013355 | Cal Maine vs. Datang International Power | Cal Maine vs. Science Applications International | Cal Maine vs. Harmony Gold Mining |
| Webster Financial vs. US Bancorp | Webster Financial vs. The PNC Financial | Webster Financial vs. Fifth Third Bancorp | Webster Financial vs. Regions Financial |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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