Correlation Between WK Kellogg and Transcontinental

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

Diversification Opportunities for WK Kellogg and Transcontinental

0.43

Correlation Coefficient

WK Kellogg  Transcontinental

Very weak diversification

The 3 months correlation between KLG and Transcontinental is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental Realty 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of WK Kellogg i.e., WK Kellogg and Transcontinental go up and down completely randomly.

Pair Corralation between WK Kellogg and Transcontinental

Considering the 90-day investment horizon WK Kellogg Co is expected to under-perform the Transcontinental. But the stock apears to be less risky and, when comparing its historical volatility, WK Kellogg Co is 1.04 times less risky than Transcontinental. The stock trades about -0.32 of its potential returns per unit of risk. The Transcontinental Realty Investors is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,921  in Transcontinental Realty Investors on October 9, 2024 and sell it today you would earn a total of  25.00  from holding Transcontinental Realty Investors or generate 0.86% 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.  Transcontinental Realty Invest

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.

Transcontinental Realty

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WK Kellogg and Transcontinental

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

The idea behind WK Kellogg Co and Transcontinental Realty Investors 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.