Correlation Between Associated British and Kellanova

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

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

Diversification Opportunities for Associated British and Kellanova

-0.31

Correlation Coefficient

Associated British  Kellanova

Very good diversification

The 3 months correlation between Associated and Kellanova is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Kellanova go up and down completely randomly.

Pair Corralation between Associated British and Kellanova

Assuming the 90 days horizon Associated British Foods is expected to generate 7.83 times more return on investment than Kellanova. However, Associated British is 7.83 times more volatile than Kellanova. It trades about 0.02 of its potential returns per unit of risk. Kellanova is currently generating about 0.1 per unit of risk. If you would invest  2,888  in Associated British Foods on September 6, 2024 and sell it today you would earn a total of  31.00  from holding Associated British Foods or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Associated British Foods  vs.  Kellanova

Associated British Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Associated British Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Associated British is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Kellanova

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Associated British and Kellanova

The main advantage of trading using opposite Associated British and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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 Associated British Foods 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.