Correlation Between WK Kellogg and General Mills

Can any of the company-specific risk be diversified away by investing in both WK Kellogg and General Mills 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 General Mills 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 General Mills, you can compare the effects of market volatilities on WK Kellogg and General Mills 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 General Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of WK Kellogg and General Mills.

Diversification Opportunities for WK Kellogg and General Mills

-0.36

Correlation Coefficient

WK Kellogg  General Mills

Very good diversification

The 3 months correlation between KLG and General is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of WK Kellogg i.e., WK Kellogg and General Mills go up and down completely randomly.

Pair Corralation between WK Kellogg and General Mills

Considering the 90-day investment horizon WK Kellogg Co is expected to generate 3.29 times more return on investment than General Mills. However, WK Kellogg is 3.29 times more volatile than General Mills. It trades about 0.08 of its potential returns per unit of risk. General Mills is currently generating about -0.16 per unit of risk. If you would invest  1,823  in WK Kellogg Co on September 13, 2024 and sell it today you would earn a total of  251.00  from holding WK Kellogg Co or generate 13.77% return on investment over 90 days.

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

WK Kellogg Co  vs.  General Mills

WK Kellogg

Risk-Adjusted Performance

6 of 100

Modest

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

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with WK Kellogg and General Mills

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

The idea behind WK Kellogg Co and General Mills 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.