Correlation Between Lancaster Colony and ConAgra Foods

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

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

Diversification Opportunities for Lancaster Colony and ConAgra Foods

-0.4

Correlation Coefficient

Lancaster Colony  ConAgra Foods

Very good diversification

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

Pair Corralation between Lancaster Colony and ConAgra Foods

Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the ConAgra Foods. In addition to that, Lancaster Colony is 1.52 times more volatile than ConAgra Foods. It trades about -0.15 of its total potential returns per unit of risk. ConAgra Foods is currently generating about -0.05 per unit of volatility. If you would invest  2,745  in ConAgra Foods on September 24, 2024 and sell it today you would lose (36.00) from holding ConAgra Foods or give up 1.31% of portfolio value over 90 days.

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

Lancaster Colony  vs.  ConAgra Foods

Lancaster Colony

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ConAgra Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConAgra Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lancaster Colony and ConAgra Foods

The main advantage of trading using opposite Lancaster Colony and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony 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 Lancaster Colony 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.