Correlation Between Krispy Kreme and Healthy Choice

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

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

Diversification Opportunities for Krispy Kreme and Healthy Choice

0.75

Correlation Coefficient

Krispy Kreme  Healthy Choice

Poor diversification

The 3 months correlation between Krispy and Healthy is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Healthy Choice Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthy Choice Wellness 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 Healthy Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthy Choice Wellness has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Healthy Choice go up and down completely randomly.

Pair Corralation between Krispy Kreme and Healthy Choice

Given the investment horizon of 90 days Krispy Kreme is expected to generate 0.14 times more return on investment than Healthy Choice. However, Krispy Kreme is 6.92 times less risky than Healthy Choice. It trades about -0.1 of its potential returns per unit of risk. Healthy Choice Wellness is currently generating about -0.03 per unit of risk. If you would invest  1,014  in Krispy Kreme on October 8, 2024 and sell it today you would lose (32.00) from holding Krispy Kreme or give up 3.16% of portfolio value over 90 days.

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

Krispy Kreme  vs.  Healthy Choice Wellness

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.

Healthy Choice Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthy Choice Wellness has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Krispy Kreme and Healthy Choice

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

The idea behind Krispy Kreme and Healthy Choice Wellness 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.