Correlation Between Vulcan Materials and Kellanova

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

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

Diversification Opportunities for Vulcan Materials and Kellanova

0.47

Correlation Coefficient

Vulcan Materials  Kellanova

Very weak diversification

The 3 months correlation between Vulcan and Kellanova is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and Kellanova go up and down completely randomly.

Pair Corralation between Vulcan Materials and Kellanova

Assuming the 90 days trading horizon Vulcan Materials is expected to generate 1.49 times less return on investment than Kellanova. In addition to that, Vulcan Materials is 1.65 times more volatile than Kellanova. It trades about 0.04 of its total potential returns per unit of risk. Kellanova is currently generating about 0.09 per unit of volatility. If you would invest  23,052  in Kellanova on October 24, 2024 and sell it today you would earn a total of  1,507  from holding Kellanova or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Vulcan Materials  vs.  Kellanova

Vulcan Materials

Risk-Adjusted Performance

2 of 100

Weak

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

Kellanova

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kellanova may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vulcan Materials and Kellanova

The main advantage of trading using opposite Vulcan Materials and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.