Correlation Between CAL-MAINE FOODS and Targa Resources

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

Diversification Opportunities for CAL-MAINE FOODS and Targa Resources

0.61

Correlation Coefficient

CAL-MAINE FOODS  Targa Resources

Poor diversification

The 3 months correlation between CAL-MAINE and Targa is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Targa Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources Corp 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 Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources Corp has no effect on the direction of CAL-MAINE FOODS i.e., CAL-MAINE FOODS and Targa Resources go up and down completely randomly.

Pair Corralation between CAL-MAINE FOODS and Targa Resources

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to under-perform the Targa Resources. In addition to that, CAL-MAINE FOODS is 1.56 times more volatile than Targa Resources Corp. It trades about -0.07 of its total potential returns per unit of risk. Targa Resources Corp is currently generating about 0.06 per unit of volatility. If you would invest  17,015  in Targa Resources Corp on December 23, 2024 and sell it today you would earn a total of  1,175  from holding Targa Resources Corp or generate 6.91% return on investment over 90 days.

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

CAL MAINE FOODS  vs.  Targa Resources Corp

CAL MAINE FOODS

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAL MAINE FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Targa Resources Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Targa Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CAL-MAINE FOODS and Targa Resources

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

The idea behind CAL MAINE FOODS and Targa Resources 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.