Correlation Between Australian Agricultural and Cal Maine

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

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

Diversification Opportunities for Australian Agricultural and Cal Maine

-0.63

Correlation Coefficient

Australian Agricultural  Cal Maine

Excellent diversification

The 3 months correlation between Australian and Cal is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural 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 Australian Agricultural 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 Australian Agricultural 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 Australian Agricultural i.e., Australian Agricultural and Cal Maine go up and down completely randomly.

Pair Corralation between Australian Agricultural and Cal Maine

Assuming the 90 days horizon Australian Agricultural is expected to generate 0.68 times more return on investment than Cal Maine. However, Australian Agricultural is 1.47 times less risky than Cal Maine. It trades about 0.08 of its potential returns per unit of risk. Cal Maine Foods is currently generating about -0.03 per unit of risk. If you would invest  86.00  in Australian Agricultural on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Australian Agricultural or generate 10.47% return on investment over 90 days.

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

Australian Agricultural  vs.  Cal Maine Foods

Australian Agricultural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Australian Agricultural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 fragile performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Australian Agricultural and Cal Maine

The main advantage of trading using opposite Australian Agricultural and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural 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 Australian Agricultural 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.