Correlation Between Performance Food and Cal-Maine Foods

Can any of the company-specific risk be diversified away by investing in both Performance Food and Cal-Maine Foods 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 Performance Food and Cal-Maine Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Performance Food Group and Cal Maine Foods, you can compare the effects of market volatilities on Performance Food and Cal-Maine Foods 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 Performance Food with a short position of Cal-Maine Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Cal-Maine Foods.

Diversification Opportunities for Performance Food and Cal-Maine Foods

0.89

Correlation Coefficient

Performance Food  Cal-Maine Foods

Very poor diversification

The 3 months correlation between Performance and Cal-Maine is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods and Performance Food 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 Performance Food Group are associated (or correlated) with Cal-Maine Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Performance Food i.e., Performance Food and Cal-Maine Foods go up and down completely randomly.

Pair Corralation between Performance Food and Cal-Maine Foods

Assuming the 90 days trading horizon Performance Food Group is expected to under-perform the Cal-Maine Foods. But the stock apears to be less risky and, when comparing its historical volatility, Performance Food Group is 3.05 times less risky than Cal-Maine Foods. The stock trades about -0.21 of its potential returns per unit of risk. The Cal Maine Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,340  in Cal Maine Foods on October 4, 2024 and sell it today you would earn a total of  256.00  from holding Cal Maine Foods or generate 2.74% return on investment over 90 days.

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

Performance Food Group  vs.  Cal Maine Foods

Performance Food

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Performance Food unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cal Maine Foods

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cal-Maine Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Performance Food and Cal-Maine Foods

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

The idea behind Performance Food Group and Cal Maine Foods 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.