Correlation Between APPLIED MATERIALS and Cal-Maine Foods

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

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

Diversification Opportunities for APPLIED MATERIALS and Cal-Maine Foods

-0.15

Correlation Coefficient

APPLIED MATERIALS  Cal-Maine Foods

Good diversification

The 3 months correlation between APPLIED and Cal-Maine is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS are associated (or correlated) with Cal-Maine Foods. 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Cal-Maine Foods go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Cal-Maine Foods

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 2.83 times less return on investment than Cal-Maine Foods. In addition to that, APPLIED MATERIALS is 1.12 times more volatile than Cal Maine Foods. It trades about 0.09 of its total potential returns per unit of risk. Cal Maine Foods is currently generating about 0.27 per unit of volatility. If you would invest  7,994  in Cal Maine Foods on October 23, 2024 and sell it today you would earn a total of  3,146  from holding Cal Maine Foods or generate 39.35% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  Cal Maine Foods

APPLIED MATERIALS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, APPLIED MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cal Maine Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cal-Maine Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and Cal-Maine Foods

The main advantage of trading using opposite APPLIED MATERIALS and Cal-Maine Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, Cal-Maine Foods 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 Foods will offset losses from the drop in Cal-Maine Foods' long position.

The idea behind APPLIED MATERIALS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.