Correlation Between CAL-MAINE FOODS and Realty Income

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

Diversification Opportunities for CAL-MAINE FOODS and Realty Income

-0.59

Correlation Coefficient

CAL-MAINE FOODS  Realty Income

Excellent diversification

The 3 months correlation between CAL-MAINE and Realty is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income 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 Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of CAL-MAINE FOODS i.e., CAL-MAINE FOODS and Realty Income go up and down completely randomly.

Pair Corralation between CAL-MAINE FOODS and Realty Income

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.73 times more return on investment than Realty Income. However, CAL-MAINE FOODS is 1.73 times more volatile than Realty Income. It trades about 0.09 of its potential returns per unit of risk. Realty Income is currently generating about 0.0 per unit of risk. If you would invest  4,570  in CAL MAINE FOODS on October 5, 2024 and sell it today you would earn a total of  5,304  from holding CAL MAINE FOODS or generate 116.06% return on investment over 90 days.

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

CAL MAINE FOODS  vs.  Realty Income

CAL MAINE FOODS

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CAL-MAINE FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CAL-MAINE FOODS and Realty Income

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

The idea behind CAL MAINE FOODS and Realty Income 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.