Correlation Between CAPITAL and WK Kellogg

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

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

Diversification Opportunities for CAPITAL and WK Kellogg

0.49

Correlation Coefficient

CAPITAL  WK Kellogg

Very weak diversification

The 3 months correlation between CAPITAL and KLG is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CAPITAL ONE FINANCIAL and WK Kellogg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WK Kellogg and CAPITAL 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 CAPITAL ONE FINANCIAL 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 CAPITAL i.e., CAPITAL and WK Kellogg go up and down completely randomly.

Pair Corralation between CAPITAL and WK Kellogg

Assuming the 90 days trading horizon CAPITAL is expected to generate 19.92 times less return on investment than WK Kellogg. But when comparing it to its historical volatility, CAPITAL ONE FINANCIAL is 11.48 times less risky than WK Kellogg. It trades about 0.03 of its potential returns per unit of risk. WK Kellogg Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,750  in WK Kellogg Co on December 22, 2024 and sell it today you would earn a total of  126.00  from holding WK Kellogg Co or generate 7.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

CAPITAL ONE FINANCIAL  vs.  WK Kellogg Co

CAPITAL ONE FINANCIAL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CAPITAL ONE FINANCIAL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

WK Kellogg

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WK Kellogg Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, WK Kellogg may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CAPITAL and WK Kellogg

The main advantage of trading using opposite CAPITAL and WK Kellogg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAPITAL 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 CAPITAL ONE FINANCIAL 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.