Correlation Between Kroger and KRISPY KREME

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

By analyzing existing cross correlation between The Kroger Co and KRISPY KREME DL 01, you can compare the effects of market volatilities on Kroger and KRISPY KREME 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 Kroger with a short position of KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and KRISPY KREME.

Diversification Opportunities for Kroger and KRISPY KREME

-0.16

Correlation Coefficient

Kroger  KRISPY KREME

Good diversification

The 3 months correlation between Kroger and KRISPY is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding The Kroger Co and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL and Kroger 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 The Kroger Co are associated (or correlated) with KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of Kroger i.e., Kroger and KRISPY KREME go up and down completely randomly.

Pair Corralation between Kroger and KRISPY KREME

Assuming the 90 days horizon The Kroger Co is expected to generate 0.77 times more return on investment than KRISPY KREME. However, The Kroger Co is 1.3 times less risky than KRISPY KREME. It trades about 0.14 of its potential returns per unit of risk. KRISPY KREME DL 01 is currently generating about -0.06 per unit of risk. If you would invest  4,995  in The Kroger Co on September 24, 2024 and sell it today you would earn a total of  871.00  from holding The Kroger Co or generate 17.44% return on investment over 90 days.

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

The Kroger Co  vs.  KRISPY KREME DL 01

The Kroger

Risk-Adjusted Performance

11 of 100

Good

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

KRISPY KREME DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Kroger and KRISPY KREME

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

The idea behind The Kroger Co and KRISPY KREME DL 01 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.