Correlation Between GM and KROGER

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

By analyzing existing cross correlation between General Motors and KROGER CO, you can compare the effects of market volatilities on GM 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 GM with a short position of KROGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KROGER.

Diversification Opportunities for GM and KROGER

-0.11

Correlation Coefficient

GM  KROGER

Good diversification

The 3 months correlation between GM and KROGER is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KROGER CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER CO and GM 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 General Motors 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 CO has no effect on the direction of GM i.e., GM and KROGER go up and down completely randomly.

Pair Corralation between GM and KROGER

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the KROGER. But the stock apears to be less risky and, when comparing its historical volatility, General Motors is 1.08 times less risky than KROGER. The stock trades about -0.04 of its potential returns per unit of risk. The KROGER CO is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,540  in KROGER CO on October 21, 2024 and sell it today you would earn a total of  352.00  from holding KROGER CO or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.95%
Values	Daily Returns

General Motors  vs.  KROGER CO

General Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

KROGER CO

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KROGER CO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KROGER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and KROGER

The main advantage of trading using opposite GM and KROGER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and KROGER 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.