Correlation Between Science Applications and Cal Maine

Can any of the company-specific risk be diversified away by investing in both Science Applications 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 Science Applications and Cal Maine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Science Applications International and Cal Maine Foods, you can compare the effects of market volatilities on Science Applications 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 Science Applications with a short position of Cal Maine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Cal Maine.

Diversification Opportunities for Science Applications and Cal Maine

0.7

Correlation Coefficient

Science Applications  Cal Maine

Poor diversification

The 3 months correlation between Science and Cal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati 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 Science Applications 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 Science Applications International 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 Science Applications i.e., Science Applications and Cal Maine go up and down completely randomly.

Pair Corralation between Science Applications and Cal Maine

Assuming the 90 days trading horizon Science Applications International is expected to generate 0.81 times more return on investment than Cal Maine. However, Science Applications International is 1.23 times less risky than Cal Maine. It trades about -0.01 of its potential returns per unit of risk. Cal Maine Foods is currently generating about -0.04 per unit of risk. If you would invest  10,464  in Science Applications International on December 30, 2024 and sell it today you would lose (364.00) from holding Science Applications International or give up 3.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Science Applications Internati  vs.  Cal Maine Foods

Science Applications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Science Applications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Science Applications and Cal Maine

The main advantage of trading using opposite Science Applications and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications 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.

The idea behind Science Applications International and Cal Maine Foods 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.