Correlation Between Kroger and Woolworths Group

Can any of the company-specific risk be diversified away by investing in both Kroger and Woolworths Group 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 Woolworths Group 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 Woolworths Group Limited, you can compare the effects of market volatilities on Kroger and Woolworths Group 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 Woolworths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and Woolworths Group.

Diversification Opportunities for Kroger and Woolworths Group

-0.01

Correlation Coefficient

Kroger  Woolworths Group

Good diversification

The 3 months correlation between Kroger and Woolworths is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding The Kroger Co and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group 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 Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of Kroger i.e., Kroger and Woolworths Group go up and down completely randomly.

Pair Corralation between Kroger and Woolworths Group

Assuming the 90 days horizon The Kroger Co is expected to generate 1.25 times more return on investment than Woolworths Group. However, Kroger is 1.25 times more volatile than Woolworths Group Limited. It trades about 0.01 of its potential returns per unit of risk. Woolworths Group Limited is currently generating about -0.07 per unit of risk. If you would invest  6,031  in The Kroger Co on December 27, 2024 and sell it today you would earn a total of  2.00  from holding The Kroger Co or generate 0.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

The Kroger Co  vs.  Woolworths Group Limited

The Kroger

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Kroger Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kroger is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Woolworths Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Woolworths Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kroger and Woolworths Group

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

The idea behind The Kroger Co and Woolworths Group Limited 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.