Correlation Between SM Investments and WK Kellogg

Can any of the company-specific risk be diversified away by investing in both SM Investments and WK Kellogg 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 SM Investments and WK Kellogg into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SM Investments and WK Kellogg Co, you can compare the effects of market volatilities on SM Investments and WK Kellogg 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 SM Investments with a short position of WK Kellogg. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and WK Kellogg.

Diversification Opportunities for SM Investments and WK Kellogg

-0.12

Correlation Coefficient

SM Investments  WK Kellogg

Good diversification

The 3 months correlation between SVTMF and KLG is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and WK Kellogg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WK Kellogg and SM Investments 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 SM Investments are associated (or correlated) with WK Kellogg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WK Kellogg has no effect on the direction of SM Investments i.e., SM Investments and WK Kellogg go up and down completely randomly.

Pair Corralation between SM Investments and WK Kellogg

Assuming the 90 days horizon SM Investments is expected to under-perform the WK Kellogg. But the pink sheet apears to be less risky and, when comparing its historical volatility, SM Investments is 2.0 times less risky than WK Kellogg. The pink sheet trades about -0.2 of its potential returns per unit of risk. The WK Kellogg Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,773  in WK Kellogg Co on December 19, 2024 and sell it today you would earn a total of  227.00  from holding WK Kellogg Co or generate 12.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.44%
Values	Daily Returns

SM Investments  vs.  WK Kellogg Co

SM Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

WK Kellogg

Risk-Adjusted Performance

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 unfluctuating essential indicators, WK Kellogg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SM Investments and WK Kellogg

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

The idea behind SM Investments and WK Kellogg Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.