Correlation Between ConAgra Foods and McCormick Company

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

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

Diversification Opportunities for ConAgra Foods and McCormick Company

0.82

Correlation Coefficient

ConAgra Foods  McCormick Company

Very poor diversification

The 3 months correlation between ConAgra and McCormick is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ConAgra Foods and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick rporated and ConAgra Foods 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 ConAgra Foods are associated (or correlated) with McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick rporated has no effect on the direction of ConAgra Foods i.e., ConAgra Foods and McCormick Company go up and down completely randomly.

Pair Corralation between ConAgra Foods and McCormick Company

Considering the 90-day investment horizon ConAgra Foods is expected to generate 1.4 times more return on investment than McCormick Company. However, ConAgra Foods is 1.4 times more volatile than McCormick Company Incorporated. It trades about 0.13 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about 0.01 per unit of risk. If you would invest  2,968  in ConAgra Foods on January 31, 2024 and sell it today you would earn a total of  126.00  from holding ConAgra Foods or generate 4.25% return on investment over 90 days.

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

ConAgra Foods  vs.  McCormick Company Incorporated

ConAgra Foods

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 5 (%) 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 May 2024.

McCormick rporated

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, McCormick Company exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ConAgra Foods and McCormick Company

The main advantage of trading using opposite ConAgra Foods and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ConAgra Foods position performs unexpectedly, McCormick Company 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 McCormick Company will offset losses from the drop in McCormick Company's long position.

The idea behind ConAgra Foods and McCormick Company Incorporated 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.