Correlation Between Central Garden and ConAgra Foods

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

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

Diversification Opportunities for Central Garden and ConAgra Foods

-0.4

Correlation Coefficient

Central Garden  ConAgra Foods

Very good diversification

The 3 months correlation between Central and ConAgra is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Central Garden 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 Central Garden Pet 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 Central Garden i.e., Central Garden and ConAgra Foods go up and down completely randomly.

Pair Corralation between Central Garden and ConAgra Foods

Assuming the 90 days horizon Central Garden Pet is expected to under-perform the ConAgra Foods. But the stock apears to be less risky and, when comparing its historical volatility, Central Garden Pet is 1.03 times less risky than ConAgra Foods. The stock trades about -0.06 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  2,968  in ConAgra Foods on January 30, 2024 and sell it today you would earn a total of  115.00  from holding ConAgra Foods or generate 3.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Central Garden Pet  vs.  ConAgra Foods

Central Garden Pet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Central Garden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ConAgra Foods

Risk-Adjusted Performance

4 of 100

Modest

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Central Garden and ConAgra Foods

The main advantage of trading using opposite Central Garden and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden 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 Central Garden Pet 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.