Correlation Between Bank of China and CONAGRA FOODS

Can any of the company-specific risk be diversified away by investing in both Bank of China 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 Bank of China and CONAGRA FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Bank of China and CONAGRA FOODS

-0.44

Correlation Coefficient

Bank of China  CONAGRA FOODS

Very good diversification

The 3 months correlation between Bank and CONAGRA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and CONAGRA FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONAGRA FOODS and Bank of China 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 Bank of China 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 Bank of China i.e., Bank of China and CONAGRA FOODS go up and down completely randomly.

Pair Corralation between Bank of China and CONAGRA FOODS

Assuming the 90 days horizon Bank of China is expected to generate 1.53 times more return on investment than CONAGRA FOODS. However, Bank of China is 1.53 times more volatile than CONAGRA FOODS. It trades about 0.06 of its potential returns per unit of risk. CONAGRA FOODS is currently generating about 0.0 per unit of risk. If you would invest  41.00  in Bank of China on September 21, 2024 and sell it today you would earn a total of  5.00  from holding Bank of China or generate 12.2% return on investment over 90 days.

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

Bank of China  vs.  CONAGRA FOODS

Bank of China

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of China are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of China reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bank of China and CONAGRA FOODS

The main advantage of trading using opposite Bank of China and CONAGRA FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China 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's long position.

The idea behind Bank of China 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.