Correlation Between Target and Krispy Kreme
Can any of the company-specific risk be diversified away by investing in both Target 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 Target and Krispy Kreme into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Krispy Kreme, you can compare the effects of market volatilities on Target 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 Target with a short position of Krispy Kreme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Krispy Kreme.
Diversification Opportunities for Target and Krispy Kreme
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Target and Krispy is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Target and Krispy Kreme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krispy Kreme and Target 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 Target 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 has no effect on the direction of Target i.e., Target and Krispy Kreme go up and down completely randomly.
Pair Corralation between Target and Krispy Kreme
Considering the 90-day investment horizon Target is expected to generate 1.65 times more return on investment than Krispy Kreme. However, Target is 1.65 times more volatile than Krispy Kreme. It trades about -0.06 of its potential returns per unit of risk. Krispy Kreme is currently generating about -0.14 per unit of risk. If you would invest 15,506 in Target on September 24, 2024 and sell it today you would lose (2,314) from holding Target or give up 14.92% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Target vs. Krispy Kreme
Performance |
Timeline |
Target |
Krispy Kreme |
Target and Krispy Kreme Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Target and Krispy Kreme
The main advantage of trading using opposite Target and Krispy Kreme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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 Target and Krispy Kreme 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.Krispy Kreme vs. Sendas Distribuidora SA | Krispy Kreme vs. Natural Grocers by | Krispy Kreme vs. Sprouts Farmers Market | Krispy Kreme vs. Albertsons Companies |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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