Correlation Between CAL MAINE and Pembina Pipeline

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

Diversification Opportunities for CAL MAINE and Pembina Pipeline

-0.09

Correlation Coefficient

CAL MAINE  Pembina Pipeline

Good diversification

The 3 months correlation between CAL and Pembina is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of CAL MAINE i.e., CAL MAINE and Pembina Pipeline go up and down completely randomly.

Pair Corralation between CAL MAINE and Pembina Pipeline

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.64 times more return on investment than Pembina Pipeline. However, CAL MAINE is 1.64 times more volatile than Pembina Pipeline Corp. It trades about 0.09 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.05 per unit of risk. If you would invest  4,481  in CAL MAINE FOODS on September 26, 2024 and sell it today you would earn a total of  5,343  from holding CAL MAINE FOODS or generate 119.24% return on investment over 90 days.

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

CAL MAINE FOODS  vs.  Pembina Pipeline Corp

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 fragile basic indicators, CAL MAINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CAL MAINE and Pembina Pipeline

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

The idea behind CAL MAINE FOODS and Pembina Pipeline Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.