Correlation Between CAL MAINE and Postal Savings

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

Diversification Opportunities for CAL MAINE and Postal Savings

0.1

Correlation Coefficient

CAL MAINE  Postal Savings

Average diversification

The 3 months correlation between CAL and Postal is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank 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 Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of CAL MAINE i.e., CAL MAINE and Postal Savings go up and down completely randomly.

Pair Corralation between CAL MAINE and Postal Savings

Assuming the 90 days trading horizon CAL MAINE is expected to generate 1.53 times less return on investment than Postal Savings. But when comparing it to its historical volatility, CAL MAINE FOODS is 3.51 times less risky than Postal Savings. It trades about 0.18 of its potential returns per unit of risk. Postal Savings Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Postal Savings Bank on September 23, 2024 and sell it today you would earn a total of  35.00  from holding Postal Savings Bank or generate 175.0% return on investment over 90 days.

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

CAL MAINE FOODS  vs.  Postal Savings Bank

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.

Postal Savings Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Postal Savings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAL MAINE and Postal Savings

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

The idea behind CAL MAINE FOODS and Postal Savings Bank 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.