Correlation Between Cal Maine and Campbell Soup

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

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

Diversification Opportunities for Cal Maine and Campbell Soup

-0.21

Correlation Coefficient

Cal Maine  Campbell Soup

Very good diversification

The 3 months correlation between Cal and Campbell is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup and Cal Maine 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 Cal Maine Foods are associated (or correlated) with Campbell Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Soup has no effect on the direction of Cal Maine i.e., Cal Maine and Campbell Soup go up and down completely randomly.

Pair Corralation between Cal Maine and Campbell Soup

Given the investment horizon of 90 days Cal Maine Foods is expected to under-perform the Campbell Soup. In addition to that, Cal Maine is 1.78 times more volatile than Campbell Soup. It trades about -0.03 of its total potential returns per unit of risk. Campbell Soup is currently generating about -0.02 per unit of volatility. If you would invest  4,103  in Campbell Soup on December 28, 2024 and sell it today you would lose (145.00) from holding Campbell Soup or give up 3.53% of portfolio value over 90 days.

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

Cal Maine Foods  vs.  Campbell Soup

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.

Campbell Soup

Risk-Adjusted Performance

Very Weak

Over the last 90 days Campbell Soup has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Campbell Soup is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cal Maine and Campbell Soup

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

The idea behind Cal Maine Foods and Campbell Soup 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.