Correlation Between Dairy Farm and CONAGRA FOODS

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

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

Diversification Opportunities for Dairy Farm and CONAGRA FOODS

-0.37

Correlation Coefficient

Dairy Farm  CONAGRA FOODS

Very good diversification

The 3 months correlation between Dairy and CONAGRA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and CONAGRA FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONAGRA FOODS and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and CONAGRA FOODS go up and down completely randomly.

Pair Corralation between Dairy Farm and CONAGRA FOODS

Assuming the 90 days trading horizon Dairy Farm International is expected to generate 1.22 times more return on investment than CONAGRA FOODS. However, Dairy Farm is 1.22 times more volatile than CONAGRA FOODS. It trades about -0.12 of its potential returns per unit of risk. CONAGRA FOODS is currently generating about -0.27 per unit of risk. If you would invest  218.00  in Dairy Farm International on October 24, 2024 and sell it today you would lose (8.00) from holding Dairy Farm International or give up 3.67% of portfolio value over 90 days.

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

Dairy Farm International  vs.  CONAGRA FOODS

Dairy Farm International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. In spite of latest unsteady 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.

Pair Trading with Dairy Farm and CONAGRA FOODS

The main advantage of trading using opposite Dairy Farm and CONAGRA FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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's long position.

The idea behind Dairy Farm International 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.