Correlation Between Emmi AG and Kellanova

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

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

Diversification Opportunities for Emmi AG and Kellanova

-0.7

Correlation Coefficient

Emmi AG  Kellanova

Excellent diversification

The 3 months correlation between Emmi and Kellanova is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Emmi AG and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Emmi AG 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 Emmi AG 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 Emmi AG i.e., Emmi AG and Kellanova go up and down completely randomly.

Pair Corralation between Emmi AG and Kellanova

Assuming the 90 days horizon Emmi AG is expected to under-perform the Kellanova. In addition to that, Emmi AG is 6.71 times more volatile than Kellanova. It trades about -0.13 of its total potential returns per unit of risk. Kellanova is currently generating about 0.28 per unit of volatility. If you would invest  7,995  in Kellanova on December 20, 2024 and sell it today you would earn a total of  240.00  from holding Kellanova or generate 3.0% return on investment over 90 days.

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

Emmi AG  vs.  Kellanova

Emmi AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emmi AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Kellanova

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 21 (%) 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 Emmi AG and Kellanova

The main advantage of trading using opposite Emmi AG and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emmi AG 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 Emmi AG 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.