Correlation Between CAL MAINE and GEELY AUTOMOBILE

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

Diversification Opportunities for CAL MAINE and GEELY AUTOMOBILE

0.81

Correlation Coefficient

CAL MAINE  GEELY AUTOMOBILE

Very poor diversification

The 3 months correlation between CAL and GEELY is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and GEELY AUTOMOBILE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEELY AUTOMOBILE 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 GEELY AUTOMOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEELY AUTOMOBILE has no effect on the direction of CAL MAINE i.e., CAL MAINE and GEELY AUTOMOBILE go up and down completely randomly.

Pair Corralation between CAL MAINE and GEELY AUTOMOBILE

Assuming the 90 days trading horizon CAL MAINE is expected to generate 1.13 times less return on investment than GEELY AUTOMOBILE. But when comparing it to its historical volatility, CAL MAINE FOODS is 1.99 times less risky than GEELY AUTOMOBILE. It trades about 0.34 of its potential returns per unit of risk. GEELY AUTOMOBILE is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  121.00  in GEELY AUTOMOBILE on September 25, 2024 and sell it today you would earn a total of  65.00  from holding GEELY AUTOMOBILE or generate 53.72% 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.  GEELY AUTOMOBILE

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.

GEELY AUTOMOBILE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GEELY AUTOMOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAL MAINE and GEELY AUTOMOBILE

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

The idea behind CAL MAINE FOODS and GEELY AUTOMOBILE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.