Correlation Between Bunge and Kellanova
Can any of the company-specific risk be diversified away by investing in both Bunge 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 Bunge and Kellanova into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and Kellanova, you can compare the effects of market volatilities on Bunge 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 Bunge with a short position of Kellanova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Kellanova.
Diversification Opportunities for Bunge and Kellanova
Poor diversification
The 3 months correlation between Bunge and Kellanova is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Bunge 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 Bunge Limited 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 Bunge i.e., Bunge and Kellanova go up and down completely randomly.
Pair Corralation between Bunge and Kellanova
Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 1.17 times more return on investment than Kellanova. However, Bunge is 1.17 times more volatile than Kellanova. It trades about 0.29 of its potential returns per unit of risk. Kellanova is currently generating about 0.08 per unit of risk. If you would invest 9,776 in Bunge Limited on January 19, 2024 and sell it today you would earn a total of 776.00 from holding Bunge Limited or generate 7.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bunge Limited vs. Kellanova
Performance |
| Timeline |
| Bunge Limited |
| Kellanova |
Bunge and Kellanova Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bunge and Kellanova
The main advantage of trading using opposite Bunge and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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 Bunge Limited 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. Central Garden Pet | Kellanova vs. Central Garden Pet | Kellanova vs. The A2 Milk | Kellanova vs. Altavoz Entertainment |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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