Correlation Between Target and Kellanova

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

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

Diversification Opportunities for Target and Kellanova

-0.28

Correlation Coefficient

Target  Kellanova

Very good diversification

The 3 months correlation between Target and Kellanova is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Target and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Target 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 Target 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 Target i.e., Target and Kellanova go up and down completely randomly.

Pair Corralation between Target and Kellanova

Assuming the 90 days trading horizon Target is expected to under-perform the Kellanova. In addition to that, Target is 2.84 times more volatile than Kellanova. It trades about 0.0 of its total potential returns per unit of risk. Kellanova is currently generating about 0.13 per unit of volatility. If you would invest  23,212  in Kellanova on October 6, 2024 and sell it today you would earn a total of  1,778  from holding Kellanova or generate 7.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

Target  vs.  Kellanova

Target

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Target may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kellanova

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kellanova sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target and Kellanova

The main advantage of trading using opposite Target and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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 Target 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..