Correlation Between Krispy Kreme and Soho House

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

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

Diversification Opportunities for Krispy Kreme and Soho House

-0.69

Correlation Coefficient

Krispy Kreme  Soho House

Excellent diversification

The 3 months correlation between Krispy and Soho is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House 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 Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Soho House go up and down completely randomly.

Pair Corralation between Krispy Kreme and Soho House

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the Soho House. But the stock apears to be less risky and, when comparing its historical volatility, Krispy Kreme is 1.02 times less risky than Soho House. The stock trades about -0.25 of its potential returns per unit of risk. The Soho House Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  749.00  in Soho House Co on October 23, 2024 and sell it today you would earn a total of  30.00  from holding Soho House Co or generate 4.01% return on investment over 90 days.

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

Krispy Kreme  vs.  Soho House Co

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.

Soho House

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Soho House Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Soho House displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krispy Kreme and Soho House

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

The idea behind Krispy Kreme and Soho House Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.