Correlation Between Bunge and Cal Maine

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

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

Diversification Opportunities for Bunge and Cal Maine

-0.71

Correlation Coefficient

Bunge  Cal Maine

Pay attention - limited upside

The 3 months correlation between Bunge and Cal is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited 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 Bunge 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 Bunge Limited 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 Bunge i.e., Bunge and Cal Maine go up and down completely randomly.

Pair Corralation between Bunge and Cal Maine

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Cal Maine. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.13 times less risky than Cal Maine. The stock trades about -0.01 of its potential returns per unit of risk. The Cal Maine Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,108  in Cal Maine Foods on August 16, 2024 and sell it today you would earn a total of  4,021  from holding Cal Maine Foods or generate 78.72% return on investment over 90 days.

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

Bunge Limited  vs.  Cal Maine Foods

Bunge Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cal Maine Foods

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 20 (%) 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 Bunge and Cal Maine

The main advantage of trading using opposite Bunge and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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 Bunge Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.