Correlation Between Cal Maine and Rock Tech

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

Diversification Opportunities for Cal Maine and Rock Tech

-0.55

Correlation Coefficient

Cal Maine  Rock Tech

Excellent diversification

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

Pair Corralation between Cal Maine and Rock Tech

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 0.43 times more return on investment than Rock Tech. However, Cal Maine Foods is 2.31 times less risky than Rock Tech. It trades about 0.08 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.02 per unit of risk. If you would invest  4,797  in Cal Maine Foods on September 19, 2024 and sell it today you would earn a total of  5,298  from holding Cal Maine Foods or generate 110.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Cal Maine Foods  vs.  Rock Tech Lithium

Cal Maine Foods

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cal Maine unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cal Maine and Rock Tech

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

The idea behind Cal Maine Foods and Rock Tech Lithium 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.