Correlation Between China Resources and Cal-Maine Foods

Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources 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 China Resources Beer and Cal Maine Foods, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of Cal-Maine Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Cal-Maine Foods.

Diversification Opportunities for China Resources and Cal-Maine Foods

-0.68

Correlation Coefficient

China Resources  Cal-Maine Foods

Excellent diversification

The 3 months correlation between China and Cal-Maine is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer 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 China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Cal-Maine Foods go up and down completely randomly.

Pair Corralation between China Resources and Cal-Maine Foods

Assuming the 90 days horizon China Resources Beer is expected to under-perform the Cal-Maine Foods. In addition to that, China Resources is 1.55 times more volatile than Cal Maine Foods. It trades about -0.02 of its total potential returns per unit of risk. Cal Maine Foods is currently generating about 0.09 per unit of volatility. If you would invest  4,571  in Cal Maine Foods on October 5, 2024 and sell it today you would earn a total of  5,025  from holding Cal Maine Foods or generate 109.93% return on investment over 90 days.

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

China Resources Beer  vs.  Cal Maine Foods

China Resources Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cal Maine Foods

Risk-Adjusted Performance

0 of 100

Good

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 comparatively uncertain basic indicators, Cal-Maine Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Resources and Cal-Maine Foods

The main advantage of trading using opposite China Resources and Cal-Maine Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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 China Resources Beer 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..