Correlation Between Karuna Therapeutics and Kellanova

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

Diversification Opportunities for Karuna Therapeutics and Kellanova

  Correlation Coefficient

Poor diversification

The 3 months correlation between Karuna and Kellanova is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Karuna Therapeutics and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Karuna Therapeutics 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 Karuna Therapeutics 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 Karuna Therapeutics i.e., Karuna Therapeutics and Kellanova go up and down completely randomly.

Pair Corralation between Karuna Therapeutics and Kellanova

Given the investment horizon of 90 days Karuna Therapeutics is expected to generate 4.01 times less return on investment than Kellanova. But when comparing it to its historical volatility, Karuna Therapeutics is 3.74 times less risky than Kellanova. It trades about 0.11 of its potential returns per unit of risk. Kellanova is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,445  in Kellanova on November 24, 2023 and sell it today you would earn a total of  200.00  from holding Kellanova or generate 3.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Karuna Therapeutics  vs.  Kellanova

Karuna Therapeutics 

Risk-Adjusted Performance

12 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Karuna Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Karuna Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Risk-Adjusted Performance

5 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Karuna Therapeutics and Kellanova Volatility Contrast

   Predicted Return Density   

Pair Trading with Karuna Therapeutics and Kellanova

The main advantage of trading using opposite Karuna Therapeutics and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Karuna Therapeutics 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 Karuna Therapeutics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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