Correlation Between Anheuser Busch and Cal Maine

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

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

Diversification Opportunities for Anheuser Busch and Cal Maine

-0.86

Correlation Coefficient

Anheuser Busch  Cal Maine

Pay attention - limited upside

The 3 months correlation between Anheuser and Cal is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev 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 Anheuser Busch 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 Anheuser Busch Inbev 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 Anheuser Busch i.e., Anheuser Busch and Cal Maine go up and down completely randomly.

Pair Corralation between Anheuser Busch and Cal Maine

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to generate 0.47 times more return on investment than Cal Maine. However, Anheuser Busch Inbev is 2.11 times less risky than Cal Maine. It trades about 0.24 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  4,978  in Anheuser Busch Inbev on December 28, 2024 and sell it today you would earn a total of  1,236  from holding Anheuser Busch Inbev or generate 24.83% return on investment over 90 days.

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

Anheuser Busch Inbev  vs.  Cal Maine Foods

Anheuser Busch Inbev

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Anheuser Busch exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 very healthy essential indicators, Cal Maine is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Anheuser Busch and Cal Maine

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

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.