Correlation Between Kroger and IShares Trust

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

By analyzing existing cross correlation between The Kroger Co and iShares Trust , you can compare the effects of market volatilities on Kroger and IShares Trust 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 Kroger with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and IShares Trust.

Diversification Opportunities for Kroger and IShares Trust

0.22

Correlation Coefficient

Kroger  IShares Trust

Modest diversification

The 3 months correlation between Kroger and IShares is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Kroger Co and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Kroger 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 The Kroger Co are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Kroger i.e., Kroger and IShares Trust go up and down completely randomly.

Pair Corralation between Kroger and IShares Trust

Assuming the 90 days trading horizon The Kroger Co is expected to generate 3.05 times more return on investment than IShares Trust. However, Kroger is 3.05 times more volatile than iShares Trust . It trades about 0.15 of its potential returns per unit of risk. iShares Trust is currently generating about -0.05 per unit of risk. If you would invest  32,571  in The Kroger Co on October 11, 2024 and sell it today you would earn a total of  3,609  from holding The Kroger Co or generate 11.08% return on investment over 90 days.

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

The Kroger Co  vs.  iShares Trust

The Kroger

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Kroger Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kroger sustained solid returns over the last few months and may actually be approaching a breakup point.

iShares Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kroger and IShares Trust

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

The idea behind The Kroger Co and iShares Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.