Correlation Between Cal-Maine Foods and Ming Le

Can any of the company-specific risk be diversified away by investing in both Cal-Maine Foods and Ming Le 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 Ming Le 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 Ming Le Sports, you can compare the effects of market volatilities on Cal-Maine Foods and Ming Le 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 Ming Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal-Maine Foods and Ming Le.

Diversification Opportunities for Cal-Maine Foods and Ming Le

0.47

Correlation Coefficient

Cal-Maine Foods  Ming Le

Very weak diversification

The 3 months correlation between Cal-Maine and Ming is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Ming Le Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ming Le Sports 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 Ming Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ming Le Sports has no effect on the direction of Cal-Maine Foods i.e., Cal-Maine Foods and Ming Le go up and down completely randomly.

Pair Corralation between Cal-Maine Foods and Ming Le

Assuming the 90 days horizon Cal Maine Foods is expected to generate 0.53 times more return on investment than Ming Le. However, Cal Maine Foods is 1.88 times less risky than Ming Le. It trades about 0.28 of its potential returns per unit of risk. Ming Le Sports is currently generating about 0.1 per unit of risk. If you would invest  6,266  in Cal Maine Foods on September 4, 2024 and sell it today you would earn a total of  3,074  from holding Cal Maine Foods or generate 49.06% return on investment over 90 days.

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

Cal Maine Foods  vs.  Ming Le Sports

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. Despite nearly uncertain basic indicators, Cal-Maine Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Ming Le Sports

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ming Le Sports are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ming Le unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cal-Maine Foods and Ming Le

The main advantage of trading using opposite Cal-Maine Foods and Ming Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal-Maine Foods position performs unexpectedly, Ming Le 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 Ming Le will offset losses from the drop in Ming Le's long position.

The idea behind Cal Maine Foods and Ming Le Sports 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.