Correlation Between CAL MAINE and Xenia Hotels

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

Diversification Opportunities for CAL MAINE and Xenia Hotels

0.8

Correlation Coefficient

CAL MAINE  Xenia Hotels

Very poor diversification

The 3 months correlation between CAL and Xenia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts 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 Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of CAL MAINE i.e., CAL MAINE and Xenia Hotels go up and down completely randomly.

Pair Corralation between CAL MAINE and Xenia Hotels

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 0.82 times more return on investment than Xenia Hotels. However, CAL MAINE FOODS is 1.22 times less risky than Xenia Hotels. It trades about 0.29 of its potential returns per unit of risk. Xenia Hotels Resorts is currently generating about 0.08 per unit of risk. If you would invest  8,926  in CAL MAINE FOODS on September 22, 2024 and sell it today you would earn a total of  1,050  from holding CAL MAINE FOODS or generate 11.76% return on investment over 90 days.

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

CAL MAINE FOODS  vs.  Xenia Hotels Resorts

CAL MAINE FOODS

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 27 (%) 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.

Xenia Hotels Resorts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Xenia Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CAL MAINE and Xenia Hotels

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

The idea behind CAL MAINE FOODS and Xenia Hotels Resorts 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.