Correlation Between Kellogg and Coffee Holding
Can any of the company-specific risk be diversified away by investing in both Kellogg and Coffee Holding 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 Kellogg and Coffee Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kellogg Company and Coffee Holding Co, you can compare the effects of market volatilities on Kellogg and Coffee Holding 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 Kellogg with a short position of Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kellogg and Coffee Holding.
Diversification Opportunities for Kellogg and Coffee Holding
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kellogg and Coffee is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kellogg Company and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding and Kellogg 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 Kellogg Company are associated (or correlated) with Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Kellogg i.e., Kellogg and Coffee Holding go up and down completely randomly.
Pair Corralation between Kellogg and Coffee Holding
Assuming the 90 days horizon Kellogg Company is expected to generate 0.1 times more return on investment than Coffee Holding. However, Kellogg Company is 10.45 times less risky than Coffee Holding. It trades about 0.41 of its potential returns per unit of risk. Coffee Holding Co is currently generating about -0.2 per unit of risk. If you would invest 7,640 in Kellogg Company on October 14, 2024 and sell it today you would earn a total of 248.00 from holding Kellogg Company or generate 3.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kellogg Company vs. Coffee Holding Co
Performance |
| Timeline |
| Kellogg Company |
| Coffee Holding |
Kellogg and Coffee Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kellogg and Coffee Holding
The main advantage of trading using opposite Kellogg and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellogg position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding's long position.| Kellogg vs. CHEMICAL INDUSTRIES | Kellogg vs. Sinopec Shanghai Petrochemical | Kellogg vs. Mitsubishi Gas Chemical | Kellogg vs. TIANDE CHEMICAL |
| Coffee Holding vs. GWILLI FOOD | Coffee Holding vs. Richardson Electronics | Coffee Holding vs. Nomad Foods | Coffee Holding vs. Tyson Foods |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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