Correlation Between Krispy Kreme and Vail Resorts

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

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

Diversification Opportunities for Krispy Kreme and Vail Resorts

-0.51

Correlation Coefficient

Krispy Kreme  Vail Resorts

Excellent diversification

The 3 months correlation between Krispy and Vail is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts 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 Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Vail Resorts go up and down completely randomly.

Pair Corralation between Krispy Kreme and Vail Resorts

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the Vail Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Krispy Kreme is 1.04 times less risky than Vail Resorts. The stock trades about -0.16 of its potential returns per unit of risk. The Vail Resorts is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  18,411  in Vail Resorts on September 23, 2024 and sell it today you would earn a total of  21.00  from holding Vail Resorts or generate 0.11% return on investment over 90 days.

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

Krispy Kreme  vs.  Vail Resorts

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vail Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vail Resorts is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Krispy Kreme and Vail Resorts

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

The idea behind Krispy Kreme and Vail Resorts 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.