Correlation Between Natural Alternatives and ConAgra Foods

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

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

Diversification Opportunities for Natural Alternatives and ConAgra Foods

0.62

Correlation Coefficient

Natural Alternatives  ConAgra Foods

Poor diversification

The 3 months correlation between Natural and ConAgra is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Natural Alternatives Internati and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods and Natural Alternatives 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 Natural Alternatives International 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 Natural Alternatives i.e., Natural Alternatives and ConAgra Foods go up and down completely randomly.

Pair Corralation between Natural Alternatives and ConAgra Foods

Given the investment horizon of 90 days Natural Alternatives is expected to generate 1.21 times less return on investment than ConAgra Foods. In addition to that, Natural Alternatives is 1.86 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 0.14 per unit of volatility. 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

Natural Alternatives Internati  vs.  ConAgra Foods

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Natural Alternatives is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 uncertain basic indicators, ConAgra Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Natural Alternatives and ConAgra Foods

The main advantage of trading using opposite Natural Alternatives and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Alternatives 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 Natural Alternatives International 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.

Check out your portfolio center.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.