Correlation Between Cal Maine and Fresh Del

Can any of the company-specific risk be diversified away by investing in both Cal Maine and Fresh Del 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 Fresh Del 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 Fresh Del Monte, you can compare the effects of market volatilities on Cal Maine and Fresh Del 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 Fresh Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Fresh Del.

Diversification Opportunities for Cal Maine and Fresh Del

0.44

Correlation Coefficient

Cal Maine  Fresh Del

Very weak diversification

The 3 months correlation between Cal and Fresh is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Fresh Del Monte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Del Monte 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 Fresh Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Del Monte has no effect on the direction of Cal Maine i.e., Cal Maine and Fresh Del go up and down completely randomly.

Pair Corralation between Cal Maine and Fresh Del

Given the investment horizon of 90 days Cal Maine Foods is expected to generate 2.64 times more return on investment than Fresh Del. However, Cal Maine is 2.64 times more volatile than Fresh Del Monte. It trades about -0.02 of its potential returns per unit of risk. Fresh Del Monte is currently generating about -0.12 per unit of risk. If you would invest  9,979  in Cal Maine Foods on December 27, 2024 and sell it today you would lose (699.00) from holding Cal Maine Foods or give up 7.0% of portfolio value over 90 days.

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

Cal Maine Foods  vs.  Fresh Del Monte

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.

Fresh Del Monte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fresh Del Monte has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Cal Maine and Fresh Del

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

The idea behind Cal Maine Foods and Fresh Del Monte 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.