Correlation Between Farmmi and Kellanova
Can any of the company-specific risk be diversified away by investing in both Farmmi 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 Farmmi and Kellanova into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmmi Inc and Kellanova, you can compare the effects of market volatilities on Farmmi 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 Farmmi with a short position of Kellanova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmmi and Kellanova.
Diversification Opportunities for Farmmi and Kellanova
Poor diversification
The 3 months correlation between Farmmi and Kellanova is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Farmmi 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 Farmmi Inc 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 Farmmi i.e., Farmmi and Kellanova go up and down completely randomly.
Pair Corralation between Farmmi and Kellanova
Given the investment horizon of 90 days Farmmi Inc is expected to under-perform the Kellanova. In addition to that, Farmmi is 3.97 times more volatile than Kellanova. It trades about -0.08 of its total potential returns per unit of risk. Kellanova is currently generating about 0.06 per unit of volatility. If you would invest 5,844 in Kellanova on August 31, 2024 and sell it today you would earn a total of 2,271 from holding Kellanova or generate 38.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farmmi Inc vs. Kellanova
Performance |
| Timeline |
| Farmmi Inc |
| Kellanova |
Farmmi and Kellanova Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farmmi and Kellanova
The main advantage of trading using opposite Farmmi and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmmi 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 Farmmi Inc 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.| Kellanova vs. Campbell Soup | Kellanova vs. ConAgra Foods | Kellanova vs. Hormel Foods | Kellanova vs. Kraft Heinz Co |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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