Correlation Between Farmer Bros and ConAgra Foods

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

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

Diversification Opportunities for Farmer Bros and ConAgra Foods

-0.27

Correlation Coefficient

Farmer Bros  ConAgra Foods

Very good diversification

The 3 months correlation between Farmer and ConAgra is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Farmer Bros 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 Farmer Bros Co 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 Farmer Bros i.e., Farmer Bros and ConAgra Foods go up and down completely randomly.

Pair Corralation between Farmer Bros and ConAgra Foods

Given the investment horizon of 90 days Farmer Bros Co is expected to generate 4.68 times more return on investment than ConAgra Foods. However, Farmer Bros is 4.68 times more volatile than ConAgra Foods. It trades about 0.0 of its potential returns per unit of risk. ConAgra Foods is currently generating about -0.03 per unit of risk. If you would invest  457.00  in Farmer Bros Co on January 21, 2024 and sell it today you would lose (135.00) from holding Farmer Bros Co or give up 29.54% of portfolio value over 90 days.

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

Farmer Bros Co  vs.  ConAgra Foods

Farmer Bros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmer Bros Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Farmer Bros is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ConAgra Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, ConAgra Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Farmer Bros and ConAgra Foods

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