Correlation Between Krispy Kreme and Dairy Farm

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

By analyzing existing cross correlation between Krispy Kreme and Dairy Farm International, you can compare the effects of market volatilities on Krispy Kreme and Dairy Farm 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 Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krispy Kreme and Dairy Farm.

Diversification Opportunities for Krispy Kreme and Dairy Farm

-0.28

Correlation Coefficient

Krispy Kreme  Dairy Farm

Very good diversification

The 3 months correlation between Krispy and Dairy is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 are associated (or correlated) with Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Dairy Farm go up and down completely randomly.

Pair Corralation between Krispy Kreme and Dairy Farm

Given the investment horizon of 90 days Krispy Kreme is expected to generate 1.4 times more return on investment than Dairy Farm. However, Krispy Kreme is 1.4 times more volatile than Dairy Farm International. It trades about 0.0 of its potential returns per unit of risk. Dairy Farm International is currently generating about -0.03 per unit of risk. If you would invest  1,135  in Krispy Kreme on October 11, 2024 and sell it today you would lose (203.00) from holding Krispy Kreme or give up 17.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.35%
Values	Daily Returns

Krispy Kreme  vs.  Dairy Farm International

Krispy Kreme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krispy Kreme has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dairy Farm International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Dairy Farm may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Krispy Kreme and Dairy Farm

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

The idea behind Krispy Kreme and Dairy Farm International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.