Correlation Between Danone SA and ConAgra Foods

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

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

Diversification Opportunities for Danone SA and ConAgra Foods

0.62

Correlation Coefficient

Danone SA  ConAgra Foods

Poor diversification

The 3 months correlation between Danone and ConAgra is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Danone SA 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 Danone SA 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 Danone SA i.e., Danone SA and ConAgra Foods go up and down completely randomly.

Pair Corralation between Danone SA and ConAgra Foods

Assuming the 90 days horizon Danone SA is expected to generate 1.69 times more return on investment than ConAgra Foods. However, Danone SA is 1.69 times more volatile than ConAgra Foods. It trades about 0.04 of its potential returns per unit of risk. ConAgra Foods is currently generating about -0.04 per unit of risk. If you would invest  4,937  in Danone SA on September 20, 2024 and sell it today you would earn a total of  1,678  from holding Danone SA or generate 33.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.93%
Values	Daily Returns

Danone SA  vs.  ConAgra Foods

Danone SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

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 conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Danone SA and ConAgra Foods

The main advantage of trading using opposite Danone SA and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA 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 Danone SA 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.