Correlation Between General Mills and Kellanova

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

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

Diversification Opportunities for General Mills and Kellanova

0.36

Correlation Coefficient

General Mills  Kellanova

Weak diversification

The 3 months correlation between General and Kellanova is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and General Mills 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 General Mills 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 General Mills i.e., General Mills and Kellanova go up and down completely randomly.

Pair Corralation between General Mills and Kellanova

Considering the 90-day investment horizon General Mills is expected to under-perform the Kellanova. In addition to that, General Mills is 4.36 times more volatile than Kellanova. It trades about -0.5 of its total potential returns per unit of risk. Kellanova is currently generating about 0.03 per unit of volatility. If you would invest  8,056  in Kellanova on August 9, 2024 and sell it today you would earn a total of  10.00  from holding Kellanova or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Mills  vs.  Kellanova

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, General Mills is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Kellanova

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Kellanova may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with General Mills and Kellanova

The main advantage of trading using opposite General Mills and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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 General Mills 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.