Correlation Between ConAgra Foods and Seadrill

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

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

Diversification Opportunities for ConAgra Foods and Seadrill

0.7

Correlation Coefficient

ConAgra Foods  Seadrill

Poor diversification

The 3 months correlation between ConAgra and Seadrill is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ConAgra Foods and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited 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 Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of ConAgra Foods i.e., ConAgra Foods and Seadrill go up and down completely randomly.

Pair Corralation between ConAgra Foods and Seadrill

Considering the 90-day investment horizon ConAgra Foods is expected to generate 1.01 times more return on investment than Seadrill. However, ConAgra Foods is 1.01 times more volatile than Seadrill Limited. It trades about 0.14 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.01 per unit of risk. If you would invest  2,968  in ConAgra Foods on January 29, 2024 and sell it today you would earn a total of  140.00  from holding ConAgra Foods or generate 4.72% return on investment over 90 days.

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

ConAgra Foods  vs.  Seadrill Limited

ConAgra Foods

Risk-Adjusted Performance

5 of 100

Modest

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.

Seadrill Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seadrill Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Seadrill may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ConAgra Foods and Seadrill

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

The idea behind ConAgra Foods and Seadrill Limited 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.