Correlation Between Cal Maine and CSX

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

Diversification Opportunities for Cal Maine and CSX

-0.11

Correlation Coefficient

Cal Maine  CSX

Good diversification

The 3 months correlation between Cal and CSX is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and CSX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX Corporation 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 CSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSX Corporation has no effect on the direction of Cal Maine i.e., Cal Maine and CSX go up and down completely randomly.

Pair Corralation between Cal Maine and CSX

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 2.46 times more return on investment than CSX. However, Cal Maine is 2.46 times more volatile than CSX Corporation. It trades about 0.16 of its potential returns per unit of risk. CSX Corporation is currently generating about -0.14 per unit of risk. If you would invest  9,152  in Cal Maine Foods on October 25, 2024 and sell it today you would earn a total of  1,573  from holding Cal Maine Foods or generate 17.19% return on investment over 90 days.

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

Cal Maine Foods  vs.  CSX Corp.

Cal Maine Foods

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 15 (%) 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.

CSX Corporation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CSX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cal Maine and CSX

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

The idea behind Cal Maine Foods and CSX Corporation 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.