Correlation Between Davis Commodities and Kroger

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

By analyzing existing cross correlation between Davis Commodities Limited and Kroger Company, you can compare the effects of market volatilities on Davis Commodities and Kroger 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 Davis Commodities with a short position of Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Commodities and Kroger.

Diversification Opportunities for Davis Commodities and Kroger

-0.83

Correlation Coefficient

Davis Commodities  Kroger

Pay attention - limited upside

The 3 months correlation between Davis and Kroger is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Davis Commodities 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 Davis Commodities Limited are associated (or correlated) with Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Davis Commodities i.e., Davis Commodities and Kroger go up and down completely randomly.

Pair Corralation between Davis Commodities and Kroger

Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the Kroger. In addition to that, Davis Commodities is 2.29 times more volatile than Kroger Company. It trades about -0.07 of its total potential returns per unit of risk. Kroger Company is currently generating about 0.08 per unit of volatility. If you would invest  6,204  in Kroger Company on December 27, 2024 and sell it today you would earn a total of  410.00  from holding Kroger Company or generate 6.61% return on investment over 90 days.

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

Davis Commodities Limited  vs.  Kroger Company

Davis Commodities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kroger Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Davis Commodities and Kroger

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

The idea behind Davis Commodities Limited and Kroger Company 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.