Correlation Between CAL MAINE and Catalent

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

Diversification Opportunities for CAL MAINE and Catalent

0.85

Correlation Coefficient

CAL MAINE  Catalent

Very poor diversification

The 3 months correlation between CAL and Catalent is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of CAL MAINE i.e., CAL MAINE and Catalent go up and down completely randomly.

Pair Corralation between CAL MAINE and Catalent

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 2.3 times more return on investment than Catalent. However, CAL MAINE is 2.3 times more volatile than Catalent. It trades about 0.33 of its potential returns per unit of risk. Catalent is currently generating about 0.22 per unit of risk. If you would invest  6,602  in CAL MAINE FOODS on October 1, 2024 and sell it today you would earn a total of  3,218  from holding CAL MAINE FOODS or generate 48.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.55%
Values	Daily Returns

CAL MAINE FOODS  vs.  Catalent

CAL MAINE FOODS

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CAL MAINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Catalent

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CAL MAINE and Catalent

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

The idea behind CAL MAINE FOODS and Catalent 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.