Correlation Between DXC Technology and Kellanova

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

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

Diversification Opportunities for DXC Technology and Kellanova

0.71

Correlation Coefficient

DXC Technology  Kellanova

Poor diversification

The 3 months correlation between DXC and Kellanova is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and DXC Technology 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 DXC Technology 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 DXC Technology i.e., DXC Technology and Kellanova go up and down completely randomly.

Pair Corralation between DXC Technology and Kellanova

Assuming the 90 days trading horizon DXC Technology is expected to under-perform the Kellanova. In addition to that, DXC Technology is 5.45 times more volatile than Kellanova. It trades about -0.24 of its total potential returns per unit of risk. Kellanova is currently generating about -0.47 per unit of volatility. If you would invest  25,300  in Kellanova on October 23, 2024 and sell it today you would lose (750.00) from holding Kellanova or give up 2.96% of portfolio value over 90 days.

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

DXC Technology  vs.  Kellanova

DXC Technology

Risk-Adjusted Performance

6 of 100

Modest

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

Kellanova

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kellanova may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DXC Technology and Kellanova

The main advantage of trading using opposite DXC Technology and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology 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 DXC Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.