Correlation Between ConAgra Foods and China Mengniu

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

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

Diversification Opportunities for ConAgra Foods and China Mengniu

0.47

Correlation Coefficient

ConAgra Foods  China Mengniu

Very weak diversification

The 3 months correlation between ConAgra and China is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ConAgra Foods and China Mengniu Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mengniu Dairy and ConAgra Foods 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 ConAgra Foods are associated (or correlated) with China Mengniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mengniu Dairy has no effect on the direction of ConAgra Foods i.e., ConAgra Foods and China Mengniu go up and down completely randomly.

Pair Corralation between ConAgra Foods and China Mengniu

Considering the 90-day investment horizon ConAgra Foods is expected to under-perform the China Mengniu. But the stock apears to be less risky and, when comparing its historical volatility, ConAgra Foods is 1.66 times less risky than China Mengniu. The stock trades about -0.01 of its potential returns per unit of risk. The China Mengniu Dairy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,183  in China Mengniu Dairy on December 28, 2024 and sell it today you would earn a total of  210.00  from holding China Mengniu Dairy or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

ConAgra Foods  vs.  China Mengniu Dairy

ConAgra Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days ConAgra Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ConAgra Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

China Mengniu Dairy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Mengniu Dairy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, China Mengniu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ConAgra Foods and China Mengniu

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

The idea behind ConAgra Foods and China Mengniu Dairy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.