Correlation Between Krispy Kreme and Healthier Choices

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

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

Diversification Opportunities for Krispy Kreme and Healthier Choices

-0.08

Correlation Coefficient

Krispy Kreme  Healthier Choices

Good diversification

The 3 months correlation between Krispy and Healthier is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Healthier Choices Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthier Choices 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 Healthier Choices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthier Choices has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Healthier Choices go up and down completely randomly.

Pair Corralation between Krispy Kreme and Healthier Choices

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the Healthier Choices. But the stock apears to be less risky and, when comparing its historical volatility, Krispy Kreme is 206.86 times less risky than Healthier Choices. The stock trades about -0.01 of its potential returns per unit of risk. The Healthier Choices Management is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Healthier Choices Management on September 3, 2024 and sell it today you would lose (0.01) from holding Healthier Choices Management or give up 100.0% 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.  Healthier Choices Management

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 comparatively stable basic indicators, Krispy Kreme is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Healthier Choices

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Healthier Choices Management are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Healthier Choices exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krispy Kreme and Healthier Choices

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

The idea behind Krispy Kreme and Healthier Choices Management 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.