Correlation Between United Internet and KRISPY KREME

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

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

Diversification Opportunities for United Internet and KRISPY KREME

0.14

Correlation Coefficient

United Internet  KRISPY KREME

Average diversification

The 3 months correlation between United and KRISPY is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding United Internet AG 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 United Internet 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 United Internet AG 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 United Internet i.e., United Internet and KRISPY KREME go up and down completely randomly.

Pair Corralation between United Internet and KRISPY KREME

Assuming the 90 days trading horizon United Internet AG is expected to under-perform the KRISPY KREME. But the stock apears to be less risky and, when comparing its historical volatility, United Internet AG is 1.03 times less risky than KRISPY KREME. The stock trades about -0.1 of its potential returns per unit of risk. The KRISPY KREME DL 01 is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,106  in KRISPY KREME DL 01 on September 18, 2024 and sell it today you would lose (151.00) from holding KRISPY KREME DL 01 or give up 13.65% of portfolio value over 90 days.

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

United Internet AG  vs.  KRISPY KREME DL 01

United Internet AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Internet AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 United Internet and KRISPY KREME

The main advantage of trading using opposite United Internet and KRISPY KREME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Internet 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 United Internet AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.