Correlation Between Cal Maine and LVMH Mot

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

Diversification Opportunities for Cal Maine and LVMH Mot

0.66

Correlation Coefficient

Cal Maine  LVMH Mot

Poor diversification

The 3 months correlation between Cal and LVMH is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy 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 LVMH Mot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Cal Maine i.e., Cal Maine and LVMH Mot go up and down completely randomly.

Pair Corralation between Cal Maine and LVMH Mot

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 1.05 times more return on investment than LVMH Mot. However, Cal Maine is 1.05 times more volatile than LVMH Mot Hennessy. It trades about 0.2 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.04 per unit of risk. If you would invest  6,326  in Cal Maine Foods on October 25, 2024 and sell it today you would earn a total of  4,399  from holding Cal Maine Foods or generate 69.54% return on investment over 90 days.

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

Cal Maine Foods  vs.  LVMH Mot Hennessy

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.

LVMH Mot Hennessy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, LVMH Mot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cal Maine and LVMH Mot

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

The idea behind Cal Maine Foods and LVMH Mot Hennessy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.