Correlation Between Mondelez International and ConAgra Foods
Can any of the company-specific risk be diversified away by investing in both Mondelez International 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 Mondelez International and ConAgra Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mondelez International and ConAgra Foods, you can compare the effects of market volatilities on Mondelez International 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 Mondelez International with a short position of ConAgra Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mondelez International and ConAgra Foods.
Diversification Opportunities for Mondelez International and ConAgra Foods
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mondelez and ConAgra is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mondelez International and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Mondelez International 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 Mondelez International 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 Mondelez International i.e., Mondelez International and ConAgra Foods go up and down completely randomly.
Pair Corralation between Mondelez International and ConAgra Foods
Given the investment horizon of 90 days Mondelez International is expected to generate 0.9 times more return on investment than ConAgra Foods. However, Mondelez International is 1.11 times less risky than ConAgra Foods. It trades about 0.03 of its potential returns per unit of risk. ConAgra Foods is currently generating about -0.01 per unit of risk. If you would invest 6,329 in Mondelez International on February 7, 2024 and sell it today you would earn a total of 664.00 from holding Mondelez International or generate 10.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Mondelez International vs. ConAgra Foods
Performance |
Timeline |
Mondelez International |
ConAgra Foods |
Mondelez International and ConAgra Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mondelez International and ConAgra Foods
The main advantage of trading using opposite Mondelez International and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mondelez International 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 Mondelez International 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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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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