Correlation Between CAL MAINE and Centrotec

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

Diversification Opportunities for CAL MAINE and Centrotec

0.44

Correlation Coefficient

CAL MAINE  Centrotec

Very weak diversification

The 3 months correlation between CAL and Centrotec is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Centrotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrotec SE 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 Centrotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrotec SE has no effect on the direction of CAL MAINE i.e., CAL MAINE and Centrotec go up and down completely randomly.

Pair Corralation between CAL MAINE and Centrotec

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.59 times more return on investment than Centrotec. However, CAL MAINE is 1.59 times more volatile than Centrotec SE. It trades about 0.34 of its potential returns per unit of risk. Centrotec SE is currently generating about 0.09 per unit of risk. If you would invest  6,556  in CAL MAINE FOODS on September 22, 2024 and sell it today you would earn a total of  3,420  from holding CAL MAINE FOODS or generate 52.17% return on investment over 90 days.

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

CAL MAINE FOODS  vs.  Centrotec SE

CAL MAINE FOODS

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CAL MAINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Centrotec SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centrotec SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Centrotec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CAL MAINE and Centrotec

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

The idea behind CAL MAINE FOODS and Centrotec SE 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.