Correlation Between Kesko Oyj and Kroger

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

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

Diversification Opportunities for Kesko Oyj and Kroger

0.19

Correlation Coefficient

Kesko Oyj  Kroger

Average diversification

The 3 months correlation between Kesko and Kroger is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kesko Oyj ADR and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Kesko Oyj 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 Kesko Oyj ADR 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 Kesko Oyj i.e., Kesko Oyj and Kroger go up and down completely randomly.

Pair Corralation between Kesko Oyj and Kroger

Assuming the 90 days horizon Kesko Oyj is expected to generate 22.71 times less return on investment than Kroger. In addition to that, Kesko Oyj is 1.12 times more volatile than Kroger Company. It trades about 0.01 of its total potential returns per unit of risk. Kroger Company is currently generating about 0.15 per unit of volatility. If you would invest  5,341  in Kroger Company on September 2, 2024 and sell it today you would earn a total of  767.00  from holding Kroger Company or generate 14.36% return on investment over 90 days.

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

Kesko Oyj ADR  vs.  Kroger Company

Kesko Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kesko Oyj ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Kesko Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kroger Company

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kesko Oyj and Kroger

The main advantage of trading using opposite Kesko Oyj and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kesko Oyj 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 Kesko Oyj ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.