Correlation Between Lamb Weston and ConAgra Foods

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Can any of the company-specific risk be diversified away by investing in both Lamb Weston 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 Lamb Weston and ConAgra Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamb Weston Holdings and ConAgra Foods, you can compare the effects of market volatilities on Lamb Weston 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 Lamb Weston with a short position of ConAgra Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and ConAgra Foods.

Diversification Opportunities for Lamb Weston and ConAgra Foods

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Lamb and ConAgra is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Lamb Weston 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 Lamb Weston Holdings 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 Lamb Weston i.e., Lamb Weston and ConAgra Foods go up and down completely randomly.

Pair Corralation between Lamb Weston and ConAgra Foods

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 1.27 times more return on investment than ConAgra Foods. However, Lamb Weston is 1.27 times more volatile than ConAgra Foods. It trades about 0.05 of its potential returns per unit of risk. ConAgra Foods is currently generating about -0.05 per unit of risk. If you would invest  8,598  in Lamb Weston Holdings on December 29, 2023 and sell it today you would earn a total of  2,032  from holding Lamb Weston Holdings or generate 23.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lamb Weston Holdings  vs.  ConAgra Foods

 Performance 
       Timeline  
Lamb Weston Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Lamb Weston Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lamb Weston is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
ConAgra Foods 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ConAgra Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lamb Weston and ConAgra Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lamb Weston and ConAgra Foods

The main advantage of trading using opposite Lamb Weston and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston 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 Lamb Weston Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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