Correlation Between IShares Trust and Kroger

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

By analyzing existing cross correlation between iShares Trust and The Kroger Co, you can compare the effects of market volatilities on IShares Trust 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 IShares Trust with a short position of Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Kroger.

Diversification Opportunities for IShares Trust and Kroger

-0.04

Correlation Coefficient

IShares Trust  Kroger

Good diversification

The 3 months correlation between IShares and Kroger is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and The Kroger Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Kroger and IShares Trust 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 iShares Trust 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 The Kroger has no effect on the direction of IShares Trust i.e., IShares Trust and Kroger go up and down completely randomly.

Pair Corralation between IShares Trust and Kroger

Assuming the 90 days trading horizon iShares Trust is expected to under-perform the Kroger. But the etf apears to be less risky and, when comparing its historical volatility, iShares Trust is 1.22 times less risky than Kroger. The etf trades about -0.12 of its potential returns per unit of risk. The The Kroger Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  38,670  in The Kroger Co on December 24, 2024 and sell it today you would lose (1,411) from holding The Kroger Co or give up 3.65% of portfolio value over 90 days.

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

iShares Trust   vs.  The Kroger Co

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

The Kroger

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Kroger Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kroger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and Kroger

The main advantage of trading using opposite IShares Trust and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 iShares Trust and The Kroger Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.