Correlation Between Cal-Maine Foods and PF Bakkafrost

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

Diversification Opportunities for Cal-Maine Foods and PF Bakkafrost

0.55

Correlation Coefficient

Cal-Maine Foods  PF Bakkafrost

Very weak diversification

The 3 months correlation between Cal-Maine and 6BF is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and PF Bakkafrost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PF Bakkafrost 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 PF Bakkafrost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PF Bakkafrost has no effect on the direction of Cal-Maine Foods i.e., Cal-Maine Foods and PF Bakkafrost go up and down completely randomly.

Pair Corralation between Cal-Maine Foods and PF Bakkafrost

Assuming the 90 days trading horizon Cal Maine Foods is expected to under-perform the PF Bakkafrost. In addition to that, Cal-Maine Foods is 2.91 times more volatile than PF Bakkafrost. It trades about -0.45 of its total potential returns per unit of risk. PF Bakkafrost is currently generating about -0.55 per unit of volatility. If you would invest  5,260  in PF Bakkafrost on December 11, 2024 and sell it today you would lose (664.00) from holding PF Bakkafrost or give up 12.62% of portfolio value over 90 days.

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

Cal Maine Foods  vs.  PF Bakkafrost

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

PF Bakkafrost

Risk-Adjusted Performance

Very Weak

Over the last 90 days PF Bakkafrost has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cal-Maine Foods and PF Bakkafrost

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

The idea behind Cal Maine Foods and PF Bakkafrost 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.