Correlation Between Fomento Economico and ConAgra Foods

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

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

Diversification Opportunities for Fomento Economico and ConAgra Foods

0.81

Correlation Coefficient

Fomento Economico  ConAgra Foods

Very poor diversification

The 3 months correlation between Fomento and ConAgra is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fomento Economico Mexicano and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Fomento Economico 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 Fomento Economico Mexicano 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 Fomento Economico i.e., Fomento Economico and ConAgra Foods go up and down completely randomly.

Pair Corralation between Fomento Economico and ConAgra Foods

Considering the 90-day investment horizon Fomento Economico Mexicano is expected to under-perform the ConAgra Foods. But the stock apears to be less risky and, when comparing its historical volatility, Fomento Economico Mexicano is 1.3 times less risky than ConAgra Foods. The stock trades about -0.22 of its potential returns per unit of risk. The ConAgra Foods is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  3,083  in ConAgra Foods on August 30, 2024 and sell it today you would lose (338.00) from holding ConAgra Foods or give up 10.96% of portfolio value over 90 days.

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

Fomento Economico Mexicano  vs.  ConAgra Foods

Fomento Economico

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fomento Economico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing 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 latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Fomento Economico and ConAgra Foods

The main advantage of trading using opposite Fomento Economico and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fomento Economico 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 Fomento Economico Mexicano 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.