Correlation Between WK Kellogg and Kellanova

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

Diversification Opportunities for WK Kellogg and Kellanova

-0.17

Correlation Coefficient

WK Kellogg  Kellanova

Good diversification

The 3 months correlation between KLG and Kellanova is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova 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 Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of WK Kellogg i.e., WK Kellogg and Kellanova go up and down completely randomly.

Pair Corralation between WK Kellogg and Kellanova

Considering the 90-day investment horizon WK Kellogg Co is expected to under-perform the Kellanova. In addition to that, WK Kellogg is 1.76 times more volatile than Kellanova. It trades about -0.01 of its total potential returns per unit of risk. Kellanova is currently generating about 0.12 per unit of volatility. If you would invest  5,573  in Kellanova on October 25, 2024 and sell it today you would earn a total of  2,591  from holding Kellanova or generate 46.49% 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.  Kellanova

WK Kellogg

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WK Kellogg Co are ranked lower than 1 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Kellanova

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WK Kellogg and Kellanova

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

The idea behind WK Kellogg Co and Kellanova 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.