Correlation Between 22nd Century and Cal Maine

Can any of the company-specific risk be diversified away by investing in both 22nd Century and Cal Maine 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 22nd Century and Cal Maine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 22nd Century Group and Cal Maine Foods, you can compare the effects of market volatilities on 22nd Century and Cal Maine 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 22nd Century with a short position of Cal Maine. Check out your portfolio center. Please also check ongoing floating volatility patterns of 22nd Century and Cal Maine.

Diversification Opportunities for 22nd Century and Cal Maine

0.72

Correlation Coefficient

22nd Century  Cal Maine

Poor diversification

The 3 months correlation between 22nd and Cal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding 22nd Century 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 22nd Century 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 22nd Century Group are associated (or correlated) with Cal Maine. 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 22nd Century i.e., 22nd Century and Cal Maine go up and down completely randomly.

Pair Corralation between 22nd Century and Cal Maine

Given the investment horizon of 90 days 22nd Century Group is expected to under-perform the Cal Maine. In addition to that, 22nd Century is 3.22 times more volatile than Cal Maine Foods. It trades about -0.12 of its total potential returns per unit of risk. Cal Maine Foods is currently generating about -0.02 per unit of volatility. If you would invest  10,070  in Cal Maine Foods on December 26, 2024 and sell it today you would lose (776.00) from holding Cal Maine Foods or give up 7.71% of portfolio value over 90 days.

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

22nd Century Group  vs.  Cal Maine Foods

22nd Century Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days 22nd Century Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Cal Maine is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with 22nd Century and Cal Maine

The main advantage of trading using opposite 22nd Century and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 22nd Century position performs unexpectedly, Cal Maine 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 will offset losses from the drop in Cal Maine's long position.

The idea behind 22nd Century 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.