Correlation Between Kroger and Natural Grocers

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

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

Diversification Opportunities for Kroger and Natural Grocers

0.88

Correlation Coefficient

Kroger  Natural Grocers

Very poor diversification

The 3 months correlation between Kroger and Natural is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Natural Grocers by in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Grocers by 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 Natural Grocers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Grocers by has no effect on the direction of Kroger i.e., Kroger and Natural Grocers go up and down completely randomly.

Pair Corralation between Kroger and Natural Grocers

Allowing for the 90-day total investment horizon Kroger is expected to generate 3.19 times less return on investment than Natural Grocers. But when comparing it to its historical volatility, Kroger Company is 3.04 times less risky than Natural Grocers. It trades about 0.13 of its potential returns per unit of risk. Natural Grocers by is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,918  in Natural Grocers by on September 19, 2024 and sell it today you would earn a total of  1,145  from holding Natural Grocers by or generate 39.24% return on investment over 90 days.

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

Kroger Company  vs.  Natural Grocers by

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.

Natural Grocers by

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Grocers by are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Natural Grocers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kroger and Natural Grocers

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

The idea behind Kroger Company and Natural Grocers by 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.