Correlation Between Farmmi and Kellanova

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

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

Diversification Opportunities for Farmmi and Kellanova

0.08

Correlation Coefficient

Farmmi  Kellanova

Significant diversification

The 3 months correlation between Farmmi and Kellanova is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Farmmi 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 Farmmi Inc 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 Farmmi i.e., Farmmi and Kellanova go up and down completely randomly.

Pair Corralation between Farmmi and Kellanova

Given the investment horizon of 90 days Farmmi Inc is expected to under-perform the Kellanova. In addition to that, Farmmi is 4.4 times more volatile than Kellanova. It trades about -0.06 of its total potential returns per unit of risk. Kellanova is currently generating about 0.05 per unit of volatility. If you would invest  5,950  in Kellanova on October 21, 2024 and sell it today you would earn a total of  2,228  from holding Kellanova or generate 37.45% return on investment over 90 days.

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

Farmmi Inc  vs.  Kellanova

Farmmi Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Farmmi Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile primary indicators, Farmmi demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Kellanova

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 8 (%) 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 Farmmi and Kellanova

The main advantage of trading using opposite Farmmi and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmmi 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 Farmmi Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.