Correlation Between Smart For and Cal Maine

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

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

Diversification Opportunities for Smart For and Cal Maine

-0.34

Correlation Coefficient

Smart For  Cal Maine

Very good diversification

The 3 months correlation between Smart and Cal is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Smart for Life 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 Smart For 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 Smart for Life 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 Smart For i.e., Smart For and Cal Maine go up and down completely randomly.

Pair Corralation between Smart For and Cal Maine

Given the investment horizon of 90 days Smart for Life is expected to under-perform the Cal Maine. In addition to that, Smart For is 7.36 times more volatile than Cal Maine Foods. It trades about -0.09 of its total potential returns per unit of risk. Cal Maine Foods is currently generating about 0.12 per unit of volatility. If you would invest  5,484  in Cal Maine Foods on March 1, 2024 and sell it today you would earn a total of  569.00  from holding Cal Maine Foods or generate 10.38% return on investment over 90 days.

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

Smart for Life  vs.  Cal Maine Foods

Smart for Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart for Life 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 technical and fundamental indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Cal Maine Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Cal Maine may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Smart For and Cal Maine

The main advantage of trading using opposite Smart For and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart For 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 Smart for Life 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.