Correlation Between KRISPY KREME and ITALIAN WINE

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

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

Diversification Opportunities for KRISPY KREME and ITALIAN WINE

0.0

Correlation Coefficient

KRISPY KREME  ITALIAN WINE

Pay attention - limited upside

The 3 months correlation between KRISPY and ITALIAN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS and KRISPY KREME 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 KRISPY KREME DL 01 are associated (or correlated) with ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of KRISPY KREME i.e., KRISPY KREME and ITALIAN WINE go up and down completely randomly.

Pair Corralation between KRISPY KREME and ITALIAN WINE

Assuming the 90 days horizon KRISPY KREME DL 01 is expected to generate 1.09 times more return on investment than ITALIAN WINE. However, KRISPY KREME is 1.09 times more volatile than ITALIAN WINE BRANDS. It trades about -0.02 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about -0.03 per unit of risk. If you would invest  982.00  in KRISPY KREME DL 01 on October 6, 2024 and sell it today you would lose (42.00) from holding KRISPY KREME DL 01 or give up 4.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

KRISPY KREME DL 01  vs.  ITALIAN WINE BRANDS

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 nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KRISPY KREME and ITALIAN WINE

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

The idea behind KRISPY KREME DL 01 and ITALIAN WINE BRANDS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.