Correlation Between Farmer Bros and Kellanova

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

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

Diversification Opportunities for Farmer Bros and Kellanova

-0.03

Correlation Coefficient

Farmer Bros  Kellanova

Good diversification

The 3 months correlation between Farmer and Kellanova is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Farmer Bros 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 Farmer Bros Co 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 Farmer Bros i.e., Farmer Bros and Kellanova go up and down completely randomly.

Pair Corralation between Farmer Bros and Kellanova

Given the investment horizon of 90 days Farmer Bros Co is expected to generate 3.37 times more return on investment than Kellanova. However, Farmer Bros is 3.37 times more volatile than Kellanova. It trades about 0.05 of its potential returns per unit of risk. Kellanova is currently generating about 0.12 per unit of risk. If you would invest  271.00  in Farmer Bros Co on January 20, 2024 and sell it today you would earn a total of  51.00  from holding Farmer Bros Co or generate 18.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Farmer Bros Co  vs.  Kellanova

Farmer Bros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmer Bros Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Farmer Bros is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Kellanova

Risk-Adjusted Performance

5 of 100

OK

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Farmer Bros and Kellanova

The main advantage of trading using opposite Farmer Bros and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros 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 Farmer Bros Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..