Correlation Between APA and Kellanova

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

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

Diversification Opportunities for APA and Kellanova

-0.44

Correlation Coefficient

APA  Kellanova

Very good diversification

The 3 months correlation between APA and Kellanova is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and APA 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 APA Corporation are associated (or correlated) with Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of APA i.e., APA and Kellanova go up and down completely randomly.

Pair Corralation between APA and Kellanova

Assuming the 90 days trading horizon APA Corporation is expected to generate 3.96 times more return on investment than Kellanova. However, APA is 3.96 times more volatile than Kellanova. It trades about 0.11 of its potential returns per unit of risk. Kellanova is currently generating about 0.13 per unit of risk. If you would invest  13,598  in APA Corporation on October 8, 2024 and sell it today you would earn a total of  767.00  from holding APA Corporation or generate 5.64% return on investment over 90 days.

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

APA Corp.  vs.  Kellanova

APA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kellanova

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kellanova sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and Kellanova

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

The idea behind APA Corporation and Kellanova 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.