Correlation Between CAL MAINE and InterContinental

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

Diversification Opportunities for CAL MAINE and InterContinental

0.89

Correlation Coefficient

CAL MAINE  InterContinental

Very poor diversification

The 3 months correlation between CAL and InterContinental is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of CAL MAINE i.e., CAL MAINE and InterContinental go up and down completely randomly.

Pair Corralation between CAL MAINE and InterContinental

Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.26 times more return on investment than InterContinental. However, CAL MAINE is 1.26 times more volatile than InterContinental Hotels Group. It trades about 0.34 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.23 per unit of risk. If you would invest  6,556  in CAL MAINE FOODS on September 23, 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	Strong
Accuracy	100.0%
Values	Daily Returns

CAL MAINE FOODS  vs.  InterContinental Hotels Group

CAL MAINE FOODS

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CAL MAINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

InterContinental Hotels

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAL MAINE and InterContinental

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

The idea behind CAL MAINE FOODS and InterContinental Hotels Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.