Correlation Between Krispy Kreme and J Sainsbury

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

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

Diversification Opportunities for Krispy Kreme and J Sainsbury

0.15

Correlation Coefficient

Krispy Kreme  J Sainsbury

Average diversification

The 3 months correlation between Krispy and JSNSF is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and J Sainsbury plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury plc and Krispy Kreme 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 Krispy Kreme are associated (or correlated) with J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury plc has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and J Sainsbury go up and down completely randomly.

Pair Corralation between Krispy Kreme and J Sainsbury

Given the investment horizon of 90 days Krispy Kreme is expected to generate 0.48 times more return on investment than J Sainsbury. However, Krispy Kreme is 2.07 times less risky than J Sainsbury. It trades about -0.01 of its potential returns per unit of risk. J Sainsbury plc is currently generating about -0.01 per unit of risk. If you would invest  1,131  in Krispy Kreme on September 2, 2024 and sell it today you would lose (29.00) from holding Krispy Kreme or give up 2.56% of portfolio value over 90 days.

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

Krispy Kreme  vs.  J Sainsbury plc

Krispy Kreme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krispy Kreme has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Krispy Kreme is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

J Sainsbury plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J Sainsbury plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, J Sainsbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Krispy Kreme and J Sainsbury

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

The idea behind Krispy Kreme and J Sainsbury plc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.