Correlation Between Cal Maine and Anheuser Busch

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

Diversification Opportunities for Cal Maine and Anheuser Busch

-0.68

Correlation Coefficient

Cal Maine  Anheuser Busch

Excellent diversification

The 3 months correlation between Cal and Anheuser is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Cal Maine i.e., Cal Maine and Anheuser Busch go up and down completely randomly.

Pair Corralation between Cal Maine and Anheuser Busch

Given the investment horizon of 90 days Cal Maine Foods is expected to under-perform the Anheuser Busch. In addition to that, Cal Maine is 1.69 times more volatile than Anheuser Busch Inbev. It trades about -0.11 of its total potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.18 per unit of volatility. If you would invest  6,007  in Anheuser Busch Inbev on January 20, 2024 and sell it today you would lose (216.00) from holding Anheuser Busch Inbev or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Cal Maine Foods  vs.  Anheuser Busch Inbev

Cal Maine Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent essential indicators, Cal Maine may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cal Maine and Anheuser Busch

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

The idea behind Cal Maine Foods and Anheuser Busch Inbev 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.