Correlation Between Conagra Brands and Fifth Third

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Can any of the company-specific risk be diversified away by investing in both Conagra Brands and Fifth Third 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 Brands and Fifth Third into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Conagra Brands and Fifth Third Bancorp, you can compare the effects of market volatilities on Conagra Brands and Fifth Third 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 Brands with a short position of Fifth Third. Check out your portfolio center. Please also check ongoing floating volatility patterns of Conagra Brands and Fifth Third.

Diversification Opportunities for Conagra Brands and Fifth Third

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Conagra and Fifth is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Conagra Brands and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp and Conagra Brands 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 Brands are associated (or correlated) with Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Conagra Brands i.e., Conagra Brands and Fifth Third go up and down completely randomly.

Pair Corralation between Conagra Brands and Fifth Third

Considering the 90-day investment horizon Conagra Brands is expected to under-perform the Fifth Third. In addition to that, Conagra Brands is 3.52 times more volatile than Fifth Third Bancorp. It trades about -0.05 of its total potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.2 per unit of volatility. If you would invest  2,493  in Fifth Third Bancorp on May 10, 2022 and sell it today you would earn a total of  57.00  from holding Fifth Third Bancorp or generate 2.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Conagra Brands  vs.  Fifth Third Bancorp

 Performance (%) 
       Timeline  
Conagra Brands 
Conagra Performance
0 of 100
Over the last 90 days Conagra Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Conagra Brands is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Conagra Price Channel

Fifth Third Bancorp 
Fifth Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Fifth Third is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Fifth Price Channel

Conagra Brands and Fifth Third Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Conagra Brands and Fifth Third

The main advantage of trading using opposite Conagra Brands and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conagra Brands position performs unexpectedly, Fifth Third 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 Fifth Third will offset losses from the drop in Fifth Third's long position.
The idea behind Conagra Brands and Fifth Third Bancorp 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.

Fifth Third Bancorp

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Fifth Third as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Fifth Third's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Fifth Third's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Fifth Third Bancorp.
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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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