Correlation Between Cal Maine and Sands China

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

Diversification Opportunities for Cal Maine and Sands China

0.27

Correlation Coefficient

Cal Maine  Sands China

Modest diversification

The 3 months correlation between Cal and Sands is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Sands China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands China 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 Sands China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands China has no effect on the direction of Cal Maine i.e., Cal Maine and Sands China go up and down completely randomly.

Pair Corralation between Cal Maine and Sands China

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 1.1 times more return on investment than Sands China. However, Cal Maine is 1.1 times more volatile than Sands China. It trades about 0.18 of its potential returns per unit of risk. Sands China is currently generating about -0.06 per unit of risk. If you would invest  8,220  in Cal Maine Foods on October 26, 2024 and sell it today you would earn a total of  2,355  from holding Cal Maine Foods or generate 28.65% return on investment over 90 days.

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

Cal Maine Foods  vs.  Sands China

Cal Maine Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cal Maine unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sands China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sands China 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 and Sands China

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

The idea behind Cal Maine Foods and Sands China 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 Anywhere module to track or share privately all of your investments from the convenience of any device.