Correlation Between Kellanova and Lifeway Foods

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Can any of the company-specific risk be diversified away by investing in both Kellanova and Lifeway Foods 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 Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kellanova and Lifeway Foods, you can compare the effects of market volatilities on Kellanova and Lifeway Foods 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 Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kellanova and Lifeway Foods.

Diversification Opportunities for Kellanova and Lifeway Foods

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Kellanova and Lifeway is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kellanova and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods 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 Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Kellanova i.e., Kellanova and Lifeway Foods go up and down completely randomly.

Pair Corralation between Kellanova and Lifeway Foods

Taking into account the 90-day investment horizon Kellanova is expected to generate 13.66 times less return on investment than Lifeway Foods. But when comparing it to its historical volatility, Kellanova is 6.52 times less risky than Lifeway Foods. It trades about 0.13 of its potential returns per unit of risk. Lifeway Foods is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,172  in Lifeway Foods on December 30, 2023 and sell it today you would earn a total of  550.00  from holding Lifeway Foods or generate 46.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Kellanova  vs.  Lifeway Foods

 Performance 
       Timeline  
Kellanova 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Weak
Over the last 90 days Kellanova has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.
Lifeway Foods 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Lifeway Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Kellanova and Lifeway Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kellanova and Lifeway Foods

The main advantage of trading using opposite Kellanova and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellanova position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.
The idea behind Kellanova and Lifeway Foods 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.
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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