Correlation Between Kellanova and Davidstea

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

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

Diversification Opportunities for Kellanova and Davidstea

-0.46

Correlation Coefficient

Kellanova  Davidstea

Very good diversification

The 3 months correlation between Kellanova and Davidstea is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kellanova and Davidstea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davidstea and Kellanova 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 Kellanova are associated (or correlated) with Davidstea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davidstea has no effect on the direction of Kellanova i.e., Kellanova and Davidstea go up and down completely randomly.

Pair Corralation between Kellanova and Davidstea

Taking into account the 90-day investment horizon Kellanova is expected to generate 0.16 times more return on investment than Davidstea. However, Kellanova is 6.1 times less risky than Davidstea. It trades about -0.03 of its potential returns per unit of risk. Davidstea is currently generating about -0.01 per unit of risk. If you would invest  6,505  in Kellanova on January 26, 2024 and sell it today you would lose (630.00) from holding Kellanova or give up 9.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	15.73%
Values	Daily Returns

Kellanova  vs.  Davidstea

Kellanova

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 7 (%) 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 May 2024.

Davidstea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davidstea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Davidstea is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kellanova and Davidstea

The main advantage of trading using opposite Kellanova and Davidstea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellanova position performs unexpectedly, Davidstea 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 Davidstea will offset losses from the drop in Davidstea's long position.

The idea behind Kellanova and Davidstea 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.