Correlation Between Krispy Kreme and Smart Share

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

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

Diversification Opportunities for Krispy Kreme and Smart Share

-0.49

Correlation Coefficient

Krispy Kreme  Smart Share

Very good diversification

The 3 months correlation between Krispy and Smart is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global 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 Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Smart Share go up and down completely randomly.

Pair Corralation between Krispy Kreme and Smart Share

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the Smart Share. But the stock apears to be less risky and, when comparing its historical volatility, Krispy Kreme is 1.66 times less risky than Smart Share. The stock trades about 0.0 of its potential returns per unit of risk. The Smart Share Global is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Smart Share Global on October 15, 2024 and sell it today you would lose (26.00) from holding Smart Share Global or give up 20.8% of portfolio value over 90 days.

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

Krispy Kreme  vs.  Smart Share Global

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.

Smart Share Global

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krispy Kreme and Smart Share

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

The idea behind Krispy Kreme and Smart Share Global 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.