Correlation Between Cal Maine and Ebro Foods

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

Diversification Opportunities for Cal Maine and Ebro Foods

-0.46

Correlation Coefficient

Cal Maine  Ebro Foods

Very good diversification

The 3 months correlation between Cal and Ebro is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods SA has no effect on the direction of Cal Maine i.e., Cal Maine and Ebro Foods go up and down completely randomly.

Pair Corralation between Cal Maine and Ebro Foods

Assuming the 90 days trading horizon Cal Maine Foods is expected to under-perform the Ebro Foods. In addition to that, Cal Maine is 3.29 times more volatile than Ebro Foods SA. It trades about -0.02 of its total potential returns per unit of risk. Ebro Foods SA is currently generating about 0.1 per unit of volatility. If you would invest  1,568  in Ebro Foods SA on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Ebro Foods SA or generate 6.38% return on investment over 90 days.

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

Cal Maine Foods  vs.  Ebro Foods SA

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ebro Foods SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ebro Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cal Maine and Ebro Foods

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

The idea behind Cal Maine Foods and Ebro Foods SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.