Correlation Between Albertsons Companies and Kroger

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

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

Diversification Opportunities for Albertsons Companies and Kroger

0.72

Correlation Coefficient

Albertsons Companies  Kroger

Poor diversification

The 3 months correlation between Albertsons and Kroger is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Albertsons Companies and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Albertsons Companies 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 Albertsons Companies are associated (or correlated) with Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Albertsons Companies i.e., Albertsons Companies and Kroger go up and down completely randomly.

Pair Corralation between Albertsons Companies and Kroger

Considering the 90-day investment horizon Albertsons Companies is expected to generate 1.53 times less return on investment than Kroger. But when comparing it to its historical volatility, Albertsons Companies is 1.06 times less risky than Kroger. It trades about 0.09 of its potential returns per unit of risk. Kroger Company is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,453  in Kroger Company on September 19, 2024 and sell it today you would earn a total of  664.00  from holding Kroger Company or generate 12.18% return on investment over 90 days.

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

Albertsons Companies  vs.  Kroger Company

Albertsons Companies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albertsons Companies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Albertsons Companies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kroger Company

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Albertsons Companies and Kroger

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

The idea behind Albertsons Companies and Kroger Company 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 Stocks Directory module to find actively traded stocks across global markets.