Correlation Between Kellogg and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Kellogg and MGP Ingredients 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 Kellogg and MGP Ingredients into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kellogg Company and MGP Ingredients, you can compare the effects of market volatilities on Kellogg and MGP Ingredients 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 Kellogg with a short position of MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kellogg and MGP Ingredients.
Diversification Opportunities for Kellogg and MGP Ingredients
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Kellogg and MGP is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kellogg Company and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and Kellogg 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 Kellogg Company are associated (or correlated) with MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Kellogg i.e., Kellogg and MGP Ingredients go up and down completely randomly.
Pair Corralation between Kellogg and MGP Ingredients
Assuming the 90 days horizon Kellogg Company is expected to generate 0.54 times more return on investment than MGP Ingredients. However, Kellogg Company is 1.86 times less risky than MGP Ingredients. It trades about 0.06 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.07 per unit of risk. If you would invest 5,795 in Kellogg Company on October 22, 2024 and sell it today you would earn a total of 2,071 from holding Kellogg Company or generate 35.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Kellogg Company vs. MGP Ingredients
Performance |
Timeline |
Kellogg Company |
MGP Ingredients |
Kellogg and MGP Ingredients Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kellogg and MGP Ingredients
The main advantage of trading using opposite Kellogg and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellogg position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.Kellogg vs. NAKED WINES PLC | Kellogg vs. RYANAIR HLDGS ADR | Kellogg vs. PLAYTIKA HOLDING DL 01 | Kellogg vs. PLAYTECH |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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