Correlation Between Cal Maine and ALERION CLEANPOWER

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

Diversification Opportunities for Cal Maine and ALERION CLEANPOWER

0.67

Correlation Coefficient

Cal Maine  ALERION CLEANPOWER

Poor diversification

The 3 months correlation between Cal and ALERION is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and ALERION CLEANPOWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALERION CLEANPOWER 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 ALERION CLEANPOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALERION CLEANPOWER has no effect on the direction of Cal Maine i.e., Cal Maine and ALERION CLEANPOWER go up and down completely randomly.

Pair Corralation between Cal Maine and ALERION CLEANPOWER

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 0.99 times more return on investment than ALERION CLEANPOWER. However, Cal Maine Foods is 1.01 times less risky than ALERION CLEANPOWER. It trades about -0.03 of its potential returns per unit of risk. ALERION CLEANPOWER is currently generating about -0.04 per unit of risk. If you would invest  9,461  in Cal Maine Foods on December 29, 2024 and sell it today you would lose (871.00) from holding Cal Maine Foods or give up 9.21% 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.  ALERION CLEANPOWER

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.

ALERION CLEANPOWER

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALERION CLEANPOWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cal Maine and ALERION CLEANPOWER

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

The idea behind Cal Maine Foods and ALERION CLEANPOWER 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.