Correlation Between Cal Maine and Williams Companies

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

Diversification Opportunities for Cal Maine and Williams Companies

0.74

Correlation Coefficient

Cal Maine  Williams Companies

Poor diversification

The 3 months correlation between Cal and Williams is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and The Williams Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Williams Companies 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 Williams Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Williams Companies has no effect on the direction of Cal Maine i.e., Cal Maine and Williams Companies go up and down completely randomly.

Pair Corralation between Cal Maine and Williams Companies

Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 2.08 times more return on investment than Williams Companies. However, Cal Maine is 2.08 times more volatile than The Williams Companies. It trades about 0.12 of its potential returns per unit of risk. The Williams Companies is currently generating about 0.17 per unit of risk. If you would invest  9,430  in Cal Maine Foods on October 10, 2024 and sell it today you would earn a total of  556.00  from holding Cal Maine Foods or generate 5.9% 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.  The Williams Companies

Cal Maine Foods

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 13 (%) 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.

The Williams Companies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Williams Companies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Williams Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cal Maine and Williams Companies

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

The idea behind Cal Maine Foods and The Williams Companies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.