Correlation Between African Agriculture and ConAgra Foods

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

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

Diversification Opportunities for African Agriculture and ConAgra Foods

-0.69

Correlation Coefficient

African Agriculture  ConAgra Foods

Excellent diversification

The 3 months correlation between African and ConAgra is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding African Agriculture Holdings and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and African Agriculture 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 African Agriculture 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 African Agriculture i.e., African Agriculture and ConAgra Foods go up and down completely randomly.

Pair Corralation between African Agriculture and ConAgra Foods

Given the investment horizon of 90 days African Agriculture Holdings is expected to under-perform the ConAgra Foods. In addition to that, African Agriculture is 5.09 times more volatile than ConAgra Foods. It trades about -0.06 of its total potential returns per unit of risk. ConAgra Foods is currently generating about 0.01 per unit of volatility. If you would invest  3,006  in ConAgra Foods on February 28, 2024 and sell it today you would earn a total of  26.00  from holding ConAgra Foods or generate 0.86% return on investment over 90 days.

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

African Agriculture Holdings  vs.  ConAgra Foods

African Agriculture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days African Agriculture Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ConAgra Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ConAgra Foods may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with African Agriculture and ConAgra Foods

The main advantage of trading using opposite African Agriculture and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Agriculture 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 African Agriculture 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.