Correlation Between WK Kellogg and Sensata Technologies
Can any of the company-specific risk be diversified away by investing in both WK Kellogg and Sensata Technologies 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 WK Kellogg and Sensata Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WK Kellogg Co and Sensata Technologies Holding, you can compare the effects of market volatilities on WK Kellogg and Sensata Technologies 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 WK Kellogg with a short position of Sensata Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of WK Kellogg and Sensata Technologies.
Diversification Opportunities for WK Kellogg and Sensata Technologies
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KLG and Sensata is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding WK Kellogg Co and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies and WK 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 WK Kellogg Co are associated (or correlated) with Sensata Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensata Technologies has no effect on the direction of WK Kellogg i.e., WK Kellogg and Sensata Technologies go up and down completely randomly.
Pair Corralation between WK Kellogg and Sensata Technologies
Considering the 90-day investment horizon WK Kellogg Co is expected to under-perform the Sensata Technologies. In addition to that, WK Kellogg is 1.46 times more volatile than Sensata Technologies Holding. It trades about -0.28 of its total potential returns per unit of risk. Sensata Technologies Holding is currently generating about 0.52 per unit of volatility. If you would invest 3,416 in Sensata Technologies Holding on February 23, 2024 and sell it today you would earn a total of 772.00 from holding Sensata Technologies Holding or generate 22.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
WK Kellogg Co vs. Sensata Technologies Holding
Performance |
Timeline |
WK Kellogg |
Sensata Technologies |
WK Kellogg and Sensata Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with WK Kellogg and Sensata Technologies
The main advantage of trading using opposite WK Kellogg and Sensata Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WK Kellogg position performs unexpectedly, Sensata Technologies 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 Sensata Technologies will offset losses from the drop in Sensata Technologies' long position.WK Kellogg vs. Smart for Life | WK Kellogg vs. McCormick Company Incorporated | WK Kellogg vs. Bon Natural Life |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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