Correlation Between Kroger and Alico

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

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

Diversification Opportunities for Kroger and Alico

-0.45

Correlation Coefficient

Kroger  Alico

Very good diversification

The 3 months correlation between Kroger and Alico is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Alico Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alico Inc 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 Kroger Company are associated (or correlated) with Alico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alico Inc has no effect on the direction of Kroger i.e., Kroger and Alico go up and down completely randomly.

Pair Corralation between Kroger and Alico

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 0.64 times more return on investment than Alico. However, Kroger Company is 1.57 times less risky than Alico. It trades about 0.15 of its potential returns per unit of risk. Alico Inc is currently generating about -0.03 per unit of risk. 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Kroger Company  vs.  Alico Inc

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.

Alico Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kroger and Alico

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

The idea behind Kroger Company and Alico Inc 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.