Correlation Between CAL-MAINE FOODS and New Residential

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

Diversification Opportunities for CAL-MAINE FOODS and New Residential

0.82

Correlation Coefficient

CAL-MAINE FOODS  New Residential

Very poor diversification

The 3 months correlation between CAL-MAINE and New is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and CAL-MAINE FOODS 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of CAL-MAINE FOODS i.e., CAL-MAINE FOODS and New Residential go up and down completely randomly.

Pair Corralation between CAL-MAINE FOODS and New Residential

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.84 times more return on investment than New Residential. However, CAL-MAINE FOODS is 1.84 times more volatile than New Residential Investment. It trades about 0.3 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.2 per unit of risk. If you would invest  9,130  in CAL MAINE FOODS on October 7, 2024 and sell it today you would earn a total of  1,080  from holding CAL MAINE FOODS or generate 11.83% 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.  New Residential Investment

CAL MAINE FOODS

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CAL-MAINE FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

New Residential Inve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, New Residential reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAL-MAINE FOODS and New Residential

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

The idea behind CAL MAINE FOODS and New Residential Investment 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 Global Correlations module to find global opportunities by holding instruments from different markets.