Correlation Between CONAGRA FOODS and Sumitomo Rubber

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

By analyzing existing cross correlation between CONAGRA FOODS and Sumitomo Rubber Industries, you can compare the effects of market volatilities on CONAGRA FOODS and Sumitomo Rubber 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 Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of CONAGRA FOODS and Sumitomo Rubber.

Diversification Opportunities for CONAGRA FOODS and Sumitomo Rubber

-0.51

Correlation Coefficient

CONAGRA FOODS  Sumitomo Rubber

Excellent diversification

The 3 months correlation between CONAGRA and Sumitomo is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CONAGRA FOODS and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu 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 Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of CONAGRA FOODS i.e., CONAGRA FOODS and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between CONAGRA FOODS and Sumitomo Rubber

Assuming the 90 days trading horizon CONAGRA FOODS is expected to under-perform the Sumitomo Rubber. In addition to that, CONAGRA FOODS is 1.14 times more volatile than Sumitomo Rubber Industries. It trades about -0.07 of its total potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.11 per unit of volatility. If you would invest  1,070  in Sumitomo Rubber Industries on December 22, 2024 and sell it today you would earn a total of  110.00  from holding Sumitomo Rubber Industries or generate 10.28% return on investment over 90 days.

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

CONAGRA FOODS  vs.  Sumitomo Rubber Industries

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. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sumitomo Rubber Indu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sumitomo Rubber may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CONAGRA FOODS and Sumitomo Rubber

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

The idea behind CONAGRA FOODS and Sumitomo Rubber Industries 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.