Correlation Between S A P and Cal Maine
Can any of the company-specific risk be diversified away by investing in both S A P and Cal Maine 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 S A P and Cal Maine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Cal Maine Foods, you can compare the effects of market volatilities on S A P and Cal Maine 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 S A P with a short position of Cal Maine. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Cal Maine.
Diversification Opportunities for S A P and Cal Maine
Almost no diversification
The 3 months correlation between SAP and Cal is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods and S A P 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 SAP SE are associated (or correlated) with Cal Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of S A P i.e., S A P and Cal Maine go up and down completely randomly.
Pair Corralation between S A P and Cal Maine
Assuming the 90 days horizon SAP SE is expected to under-perform the Cal Maine. But the stock apears to be less risky and, when comparing its historical volatility, SAP SE is 1.11 times less risky than Cal Maine. The stock trades about -0.05 of its potential returns per unit of risk. The Cal Maine Foods is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 8,088 in Cal Maine Foods on August 30, 2024 and sell it today you would earn a total of 1,082 from holding Cal Maine Foods or generate 13.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. Cal Maine Foods
Performance |
| Timeline |
| SAP SE |
| Cal Maine Foods |
S A P and Cal Maine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Cal Maine
The main advantage of trading using opposite S A P and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Cal Maine 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 Cal Maine will offset losses from the drop in Cal Maine's long position.| S A P vs. Cal Maine Foods | S A P vs. PREMIER FOODS | S A P vs. JSC Halyk bank | S A P vs. The Hanover Insurance |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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