Correlation Between BG Foods and Cal Maine

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

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

Diversification Opportunities for BG Foods and Cal Maine

0.53

Correlation Coefficient

BG Foods  Cal Maine

Very weak diversification

The 3 months correlation between BGS and Cal is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods 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 BG Foods 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 BG Foods 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 BG Foods i.e., BG Foods and Cal Maine go up and down completely randomly.

Pair Corralation between BG Foods and Cal Maine

Considering the 90-day investment horizon BG Foods is expected to generate 0.99 times more return on investment than Cal Maine. However, BG Foods is 1.01 times less risky than Cal Maine. It trades about -0.01 of its potential returns per unit of risk. Cal Maine Foods is currently generating about -0.03 per unit of risk. If you would invest  1,111  in BG Foods on January 26, 2024 and sell it today you would lose (6.00) from holding BG Foods or give up 0.54% of portfolio value over 90 days.

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

BG Foods  vs.  Cal Maine Foods

BG Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, BG Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Cal Maine Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 BG Foods and Cal Maine

The main advantage of trading using opposite BG Foods and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods 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 BG Foods 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.