Correlation Between Cal Maine and Dollarama

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

Diversification Opportunities for Cal Maine and Dollarama

-0.55

Correlation Coefficient

Cal Maine  Dollarama

Excellent diversification

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

Pair Corralation between Cal Maine and Dollarama

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 1.69 times more return on investment than Dollarama. However, Cal Maine is 1.69 times more volatile than Dollarama. It trades about 0.2 of its potential returns per unit of risk. Dollarama is currently generating about -0.01 per unit of risk. If you would invest  8,159  in Cal Maine Foods on October 25, 2024 and sell it today you would earn a total of  2,566  from holding Cal Maine Foods or generate 31.45% 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.  Dollarama

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.

Dollarama

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dollarama has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dollarama is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cal Maine and Dollarama

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

The idea behind Cal Maine Foods and Dollarama 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.