Correlation Between Associated British and ConAgra Foods

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

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

Diversification Opportunities for Associated British and ConAgra Foods

0.68

Correlation Coefficient

Associated British  ConAgra Foods

Poor diversification

The 3 months correlation between Associated and ConAgra is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Associated British 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 Associated British Foods are associated (or correlated) with ConAgra Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConAgra Foods has no effect on the direction of Associated British i.e., Associated British and ConAgra Foods go up and down completely randomly.

Pair Corralation between Associated British and ConAgra Foods

Assuming the 90 days horizon Associated British Foods is expected to under-perform the ConAgra Foods. In addition to that, Associated British is 1.24 times more volatile than ConAgra Foods. It trades about -0.02 of its total potential returns per unit of risk. ConAgra Foods is currently generating about -0.01 per unit of volatility. If you would invest  2,809  in ConAgra Foods on September 20, 2024 and sell it today you would lose (128.00) from holding ConAgra Foods or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.47%
Values	Daily Returns

Associated British Foods  vs.  ConAgra Foods

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ConAgra Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConAgra Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Associated British and ConAgra Foods

The main advantage of trading using opposite Associated British and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, ConAgra 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 ConAgra Foods will offset losses from the drop in ConAgra Foods' long position.

The idea behind Associated British Foods and ConAgra 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.