Correlation Between SUN ART and CAL MAINE

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

By analyzing existing cross correlation between SUN ART RETAIL and CAL MAINE FOODS, you can compare the effects of market volatilities on SUN ART 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 SUN ART with a short position of CAL MAINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUN ART and CAL MAINE.

Diversification Opportunities for SUN ART and CAL MAINE

0.91

Correlation Coefficient

SUN ART  CAL MAINE

Almost no diversification

The 3 months correlation between SUN and CAL is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SUN ART RETAIL 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 SUN ART 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 SUN ART RETAIL 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 SUN ART i.e., SUN ART and CAL MAINE go up and down completely randomly.

Pair Corralation between SUN ART and CAL MAINE

Assuming the 90 days trading horizon SUN ART RETAIL is expected to generate 3.03 times more return on investment than CAL MAINE. However, SUN ART is 3.03 times more volatile than CAL MAINE FOODS. It trades about 0.08 of its potential returns per unit of risk. CAL MAINE FOODS is currently generating about 0.18 per unit of risk. If you would invest  13.00  in SUN ART RETAIL on September 23, 2024 and sell it today you would earn a total of  18.00  from holding SUN ART RETAIL or generate 138.46% return on investment over 90 days.

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

SUN ART RETAIL  vs.  CAL MAINE FOODS

SUN ART RETAIL

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SUN ART RETAIL are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, SUN ART exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with SUN ART and CAL MAINE

The main advantage of trading using opposite SUN ART and CAL MAINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUN ART 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 SUN ART RETAIL 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.