Correlation Between Cal Maine and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Cal Maine and Ebro Foods 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 Ebro Foods 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 Ebro Foods SA, you can compare the effects of market volatilities on Cal Maine and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Ebro Foods.
Diversification Opportunities for Cal Maine and Ebro Foods
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cal and Ebro is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods SA has no effect on the direction of Cal Maine i.e., Cal Maine and Ebro Foods go up and down completely randomly.
Pair Corralation between Cal Maine and Ebro Foods
Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 4.36 times more return on investment than Ebro Foods. However, Cal Maine is 4.36 times more volatile than Ebro Foods SA. It trades about 0.14 of its potential returns per unit of risk. Ebro Foods SA is currently generating about -0.11 per unit of risk. If you would invest 9,152 in Cal Maine Foods on September 25, 2024 and sell it today you would earn a total of 672.00 from holding Cal Maine Foods or generate 7.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Cal Maine Foods vs. Ebro Foods SA
Performance |
Timeline |
Cal Maine Foods |
Ebro Foods SA |
Cal Maine and Ebro Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cal Maine and Ebro Foods
The main advantage of trading using opposite Cal Maine and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.The idea behind Cal Maine Foods and Ebro Foods SA 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.Ebro Foods vs. JAPAN TOBACCO UNSPADR12 | Ebro Foods vs. GALENA MINING LTD | Ebro Foods vs. Perseus Mining Limited | Ebro Foods vs. BRIT AMER TOBACCO |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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