Correlation Between WK Kellogg and Ingredion Incorporated

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

Diversification Opportunities for WK Kellogg and Ingredion Incorporated

0.55

Correlation Coefficient

WK Kellogg  Ingredion Incorporated

Very weak diversification

The 3 months correlation between KLG and Ingredion is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and Ingredion Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingredion Incorporated 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 Ingredion Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingredion Incorporated has no effect on the direction of WK Kellogg i.e., WK Kellogg and Ingredion Incorporated go up and down completely randomly.

Pair Corralation between WK Kellogg and Ingredion Incorporated

Considering the 90-day investment horizon WK Kellogg Co is expected to generate 1.47 times more return on investment than Ingredion Incorporated. However, WK Kellogg is 1.47 times more volatile than Ingredion Incorporated. It trades about 0.03 of its potential returns per unit of risk. Ingredion Incorporated is currently generating about 0.02 per unit of risk. If you would invest  1,714  in WK Kellogg Co on October 9, 2024 and sell it today you would earn a total of  45.00  from holding WK Kellogg Co or generate 2.63% return on investment over 90 days.

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

WK Kellogg Co  vs.  Ingredion Incorporated

WK Kellogg

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WK Kellogg Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Ingredion Incorporated

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ingredion Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Ingredion Incorporated is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with WK Kellogg and Ingredion Incorporated

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

The idea behind WK Kellogg Co and Ingredion Incorporated 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.