Correlation Between Adecoagro and Cal Maine

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

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

Diversification Opportunities for Adecoagro and Cal Maine

0.6

Correlation Coefficient

Adecoagro  Cal Maine

Poor diversification

The 3 months correlation between Adecoagro and Cal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA 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 Adecoagro 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 Adecoagro SA 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 Adecoagro i.e., Adecoagro and Cal Maine go up and down completely randomly.

Pair Corralation between Adecoagro and Cal Maine

Given the investment horizon of 90 days Adecoagro is expected to generate 1.44 times less return on investment than Cal Maine. In addition to that, Adecoagro is 1.19 times more volatile than Cal Maine Foods. It trades about 0.03 of its total potential returns per unit of risk. Cal Maine Foods is currently generating about 0.04 per unit of volatility. If you would invest  4,045  in Cal Maine Foods on February 9, 2024 and sell it today you would earn a total of  1,663  from holding Cal Maine Foods or generate 41.11% return on investment over 90 days.

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

Adecoagro SA  vs.  Cal Maine Foods

Adecoagro SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Adecoagro displayed solid returns over the last few months and may actually be approaching a breakup point.

Cal Maine Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Cal Maine is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Adecoagro and Cal Maine

The main advantage of trading using opposite Adecoagro and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adecoagro 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 Adecoagro SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.