Correlation Between Albemarle and WK Kellogg

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

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

Diversification Opportunities for Albemarle and WK Kellogg

0.49

Correlation Coefficient

Albemarle  WK Kellogg

Very weak diversification

The 3 months correlation between Albemarle and KLG is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and WK Kellogg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WK Kellogg and Albemarle 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 Albemarle are associated (or correlated) with WK Kellogg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WK Kellogg has no effect on the direction of Albemarle i.e., Albemarle and WK Kellogg go up and down completely randomly.

Pair Corralation between Albemarle and WK Kellogg

Assuming the 90 days trading horizon Albemarle is expected to under-perform the WK Kellogg. But the stock apears to be less risky and, when comparing its historical volatility, Albemarle is 1.14 times less risky than WK Kellogg. The stock trades about -0.01 of its potential returns per unit of risk. The WK Kellogg Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,616  in WK Kellogg Co on October 27, 2024 and sell it today you would earn a total of  82.00  from holding WK Kellogg Co or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.97%
Values	Daily Returns

Albemarle  vs.  WK Kellogg Co

Albemarle

Risk-Adjusted Performance

0 of 100

Very Weak

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

WK Kellogg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WK Kellogg Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, WK Kellogg is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Albemarle and WK Kellogg

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

The idea behind Albemarle and WK Kellogg Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.