Correlation Between Nestle SA and ConAgra Foods

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Can any of the company-specific risk be diversified away by investing in both Nestle 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 Nestle 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 Nestle SA and ConAgra Foods, you can compare the effects of market volatilities on Nestle 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 Nestle SA with a short position of ConAgra Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and ConAgra Foods.

Diversification Opportunities for Nestle SA and ConAgra Foods

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Nestle and ConAgra is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Nestle 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 Nestle 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 Nestle SA i.e., Nestle SA and ConAgra Foods go up and down completely randomly.

Pair Corralation between Nestle SA and ConAgra Foods

Assuming the 90 days horizon Nestle SA is expected to generate 5.32 times less return on investment than ConAgra Foods. But when comparing it to its historical volatility, Nestle SA is 1.11 times less risky than ConAgra Foods. It trades about 0.05 of its potential returns per unit of risk. ConAgra Foods is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,813  in ConAgra Foods on December 30, 2023 and sell it today you would earn a total of  151.00  from holding ConAgra Foods or generate 5.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Nestle SA  vs.  ConAgra Foods

 Performance 
       Timeline  
Nestle SA 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental 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

2 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nestle SA and ConAgra Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nestle SA and ConAgra Foods

The main advantage of trading using opposite Nestle SA and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle 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 Nestle 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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