Correlation Between ConAgra Foods and General Mills

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

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

Diversification Opportunities for ConAgra Foods and General Mills

0.85

Correlation Coefficient

ConAgra Foods  General Mills

Very poor diversification

The 3 months correlation between ConAgra and General is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ConAgra Foods and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of ConAgra Foods i.e., ConAgra Foods and General Mills go up and down completely randomly.

Pair Corralation between ConAgra Foods and General Mills

Considering the 90-day investment horizon ConAgra Foods is expected to generate 1.03 times more return on investment than General Mills. However, ConAgra Foods is 1.03 times more volatile than General Mills. It trades about -0.01 of its potential returns per unit of risk. General Mills is currently generating about -0.04 per unit of risk. If you would invest  2,717  in ConAgra Foods on December 29, 2024 and sell it today you would lose (71.00) from holding ConAgra Foods or give up 2.61% of portfolio value over 90 days.

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

ConAgra Foods  vs.  General Mills

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.

General Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, General Mills is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ConAgra Foods and General Mills

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

The idea behind ConAgra Foods and General Mills 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.