Correlation Between Limoneira and Cal Maine

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

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

Diversification Opportunities for Limoneira and Cal Maine

0.61

Correlation Coefficient

Limoneira  Cal Maine

Poor diversification

The 3 months correlation between Limoneira and Cal is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Limoneira Co 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 Limoneira 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 Limoneira Co 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 Limoneira i.e., Limoneira and Cal Maine go up and down completely randomly.

Pair Corralation between Limoneira and Cal Maine

Given the investment horizon of 90 days Limoneira is expected to generate 2.79 times less return on investment than Cal Maine. In addition to that, Limoneira is 1.22 times more volatile than Cal Maine Foods. It trades about 0.09 of its total potential returns per unit of risk. Cal Maine Foods is currently generating about 0.29 per unit of volatility. If you would invest  7,123  in Cal Maine Foods on August 30, 2024 and sell it today you would earn a total of  2,592  from holding Cal Maine Foods or generate 36.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Limoneira Co  vs.  Cal Maine Foods

Limoneira

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Limoneira Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Limoneira may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Cal Maine Foods

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Cal Maine displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Limoneira and Cal Maine

The main advantage of trading using opposite Limoneira and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Limoneira 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 Limoneira Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.