Correlation Between ConAgra Foods and Nestle SA
Can any of the company-specific risk be diversified away by investing in both ConAgra Foods and Nestle SA 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 Nestle SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ConAgra Foods and Nestle SA ADR, you can compare the effects of market volatilities on ConAgra Foods and Nestle SA 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 Nestle SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ConAgra Foods and Nestle SA.
Diversification Opportunities for ConAgra Foods and Nestle SA
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ConAgra and Nestle is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ConAgra Foods and Nestle SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA ADR 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 Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA ADR has no effect on the direction of ConAgra Foods i.e., ConAgra Foods and Nestle SA go up and down completely randomly.
Pair Corralation between ConAgra Foods and Nestle SA
Considering the 90-day investment horizon ConAgra Foods is expected to generate 1.21 times more return on investment than Nestle SA. However, ConAgra Foods is 1.21 times more volatile than Nestle SA ADR. It trades about -0.2 of its potential returns per unit of risk. Nestle SA ADR is currently generating about -0.41 per unit of risk. If you would invest 2,894 in ConAgra Foods on September 1, 2024 and sell it today you would lose (139.00) from holding ConAgra Foods or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
ConAgra Foods vs. Nestle SA ADR
Performance |
| Timeline |
| ConAgra Foods |
| Nestle SA ADR |
ConAgra Foods and Nestle SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ConAgra Foods and Nestle SA
The main advantage of trading using opposite ConAgra Foods and Nestle SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ConAgra Foods position performs unexpectedly, Nestle SA 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 Nestle SA will offset losses from the drop in Nestle SA's long position.| ConAgra Foods vs. Kellanova | ConAgra Foods vs. General Mills | ConAgra Foods vs. JM Smucker | ConAgra Foods vs. Hormel Foods |
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Check out your portfolio center.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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