Correlation Between Cal Maine and RWE AG

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

Diversification Opportunities for Cal Maine and RWE AG

-0.61

Correlation Coefficient

Cal Maine  RWE AG

Excellent diversification

The 3 months correlation between Cal and RWE is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of Cal Maine i.e., Cal Maine and RWE AG go up and down completely randomly.

Pair Corralation between Cal Maine and RWE AG

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 2.04 times more return on investment than RWE AG. However, Cal Maine is 2.04 times more volatile than RWE AG. It trades about 0.19 of its potential returns per unit of risk. RWE AG is currently generating about 0.02 per unit of risk. If you would invest  9,724  in Cal Maine Foods on October 25, 2024 and sell it today you would earn a total of  1,001  from holding Cal Maine Foods or generate 10.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Cal Maine Foods  vs.  RWE AG

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.

RWE AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RWE AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cal Maine and RWE AG

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

The idea behind Cal Maine Foods and RWE AG 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.