Correlation Between Krispy Kreme and DraftKings

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

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

Diversification Opportunities for Krispy Kreme and DraftKings

-0.3

Correlation Coefficient

Krispy Kreme  DraftKings

Very good diversification

The 3 months correlation between Krispy and DraftKings is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and DraftKings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DraftKings 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 DraftKings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DraftKings has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and DraftKings go up and down completely randomly.

Pair Corralation between Krispy Kreme and DraftKings

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the DraftKings. But the stock apears to be less risky and, when comparing its historical volatility, Krispy Kreme is 1.89 times less risky than DraftKings. The stock trades about -0.43 of its potential returns per unit of risk. The DraftKings is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  4,306  in DraftKings on September 27, 2024 and sell it today you would lose (462.50) from holding DraftKings or give up 10.74% of portfolio value over 90 days.

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

Krispy Kreme  vs.  DraftKings

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 latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

DraftKings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DraftKings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DraftKings 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 DraftKings

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

The idea behind Krispy Kreme and DraftKings 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.