Correlation Between WK Kellogg and Grocery Outlet

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

Diversification Opportunities for WK Kellogg and Grocery Outlet

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between KLG and Grocery is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of WK Kellogg i.e., WK Kellogg and Grocery Outlet go up and down completely randomly.

Pair Corralation between WK Kellogg and Grocery Outlet

Considering the 90-day investment horizon WK Kellogg Co is expected to under-perform the Grocery Outlet. In addition to that, WK Kellogg is 1.15 times more volatile than Grocery Outlet Holding. It trades about -0.08 of its total potential returns per unit of risk. Grocery Outlet Holding is currently generating about 0.05 per unit of volatility. If you would invest  1,571  in Grocery Outlet Holding on October 23, 2024 and sell it today you would earn a total of  24.00  from holding Grocery Outlet Holding or generate 1.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

WK Kellogg Co  vs.  Grocery Outlet Holding

 Performance 
       Timeline  
WK Kellogg 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 current stock price disturbance, may contribute to mid-run losses for the stockholders.
Grocery Outlet Holding 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

WK Kellogg and Grocery Outlet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WK Kellogg and Grocery Outlet

The main advantage of trading using opposite WK Kellogg and Grocery Outlet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WK Kellogg position performs unexpectedly, Grocery Outlet 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 Grocery Outlet will offset losses from the drop in Grocery Outlet's long position.
The idea behind WK Kellogg Co and Grocery Outlet Holding 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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