Correlation Between ConAgra Foods and WK Kellogg

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

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

Diversification Opportunities for ConAgra Foods and WK Kellogg

-0.32

Correlation Coefficient

ConAgra Foods  WK Kellogg

Very good diversification

The 3 months correlation between ConAgra and KLG is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ConAgra Foods and WK Kellogg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WK Kellogg and ConAgra Foods 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 Foods 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 ConAgra Foods i.e., ConAgra Foods and WK Kellogg go up and down completely randomly.

Pair Corralation between ConAgra Foods and WK Kellogg

Considering the 90-day investment horizon ConAgra Foods is expected to generate 55.24 times less return on investment than WK Kellogg. But when comparing it to its historical volatility, ConAgra Foods is 2.19 times less risky than WK Kellogg. It trades about 0.01 of its potential returns per unit of risk. WK Kellogg Co is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,742  in WK Kellogg Co on September 13, 2024 and sell it today you would earn a total of  332.00  from holding WK Kellogg Co or generate 19.06% return on investment over 90 days.

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

ConAgra Foods  vs.  WK Kellogg Co

ConAgra Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConAgra Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

WK Kellogg

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WK Kellogg Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, WK Kellogg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ConAgra Foods and WK Kellogg

The main advantage of trading using opposite ConAgra Foods and WK Kellogg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ConAgra Foods 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 ConAgra Foods 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.