Correlation Between Amazon and KROGER

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

By analyzing existing cross correlation between Amazon Inc and KROGER 54 percent, you can compare the effects of market volatilities on Amazon and KROGER 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 Amazon with a short position of KROGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and KROGER.

Diversification Opportunities for Amazon and KROGER

-0.57

Correlation Coefficient

Amazon  KROGER

Excellent diversification

The 3 months correlation between Amazon and KROGER is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and KROGER 54 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER 54 percent and Amazon 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 Amazon Inc are associated (or correlated) with KROGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KROGER 54 percent has no effect on the direction of Amazon i.e., Amazon and KROGER go up and down completely randomly.

Pair Corralation between Amazon and KROGER

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.96 times more return on investment than KROGER. However, Amazon Inc is 1.04 times less risky than KROGER. It trades about 0.17 of its potential returns per unit of risk. KROGER 54 percent is currently generating about -0.12 per unit of risk. If you would invest  17,789  in Amazon Inc on September 5, 2024 and sell it today you would earn a total of  3,555  from holding Amazon Inc or generate 19.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

Amazon Inc  vs.  KROGER 54 percent

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

KROGER 54 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KROGER 54 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KROGER 54 percent investors.

Pair Trading with Amazon and KROGER

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

The idea behind Amazon Inc and KROGER 54 percent 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.