Correlation Between Cal Maine and Addus HomeCare

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

Diversification Opportunities for Cal Maine and Addus HomeCare

0.73

Correlation Coefficient

Cal Maine  Addus HomeCare

Poor diversification

The 3 months correlation between Cal and Addus is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Cal Maine i.e., Cal Maine and Addus HomeCare go up and down completely randomly.

Pair Corralation between Cal Maine and Addus HomeCare

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 1.28 times more return on investment than Addus HomeCare. However, Cal Maine is 1.28 times more volatile than Addus HomeCare. It trades about -0.03 of its potential returns per unit of risk. Addus HomeCare is currently generating about -0.14 per unit of risk. If you would invest  9,187  in Cal Maine Foods on December 2, 2024 and sell it today you would lose (709.00) from holding Cal Maine Foods or give up 7.72% of portfolio value over 90 days.

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

Cal Maine Foods  vs.  Addus HomeCare

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 comparatively stable basic indicators, Cal Maine is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Addus HomeCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Addus HomeCare 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 and Addus HomeCare

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

The idea behind Cal Maine Foods and Addus HomeCare 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.