Correlation Between WK Kellogg and Youdao

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

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

Diversification Opportunities for WK Kellogg and Youdao

0.61

Correlation Coefficient

WK Kellogg  Youdao

Poor diversification

The 3 months correlation between KLG and Youdao is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and WK 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 WK Kellogg Co are associated (or correlated) with Youdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youdao Inc has no effect on the direction of WK Kellogg i.e., WK Kellogg and Youdao go up and down completely randomly.

Pair Corralation between WK Kellogg and Youdao

Considering the 90-day investment horizon WK Kellogg Co is expected to under-perform the Youdao. But the stock apears to be less risky and, when comparing its historical volatility, WK Kellogg Co is 1.05 times less risky than Youdao. The stock trades about -0.42 of its potential returns per unit of risk. The Youdao Inc is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  743.00  in Youdao Inc on October 11, 2024 and sell it today you would lose (62.00) from holding Youdao Inc or give up 8.34% of portfolio value over 90 days.

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

WK Kellogg Co  vs.  Youdao Inc

WK Kellogg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WK Kellogg Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, WK Kellogg is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Youdao Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Youdao displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WK Kellogg and Youdao

The main advantage of trading using opposite WK Kellogg and Youdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WK Kellogg position performs unexpectedly, Youdao 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 Youdao will offset losses from the drop in Youdao's long position.

The idea behind WK Kellogg Co and Youdao Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.