Correlation Between Kroger and United Guardian

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

By analyzing existing cross correlation between Kroger Company and United Guardian, you can compare the effects of market volatilities on Kroger and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and United Guardian.

Diversification Opportunities for Kroger and United Guardian

0.04

Correlation Coefficient

Kroger  United Guardian

Significant diversification

The 3 months correlation between Kroger and United is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 Kroger Company are associated (or correlated) with United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Kroger i.e., Kroger and United Guardian go up and down completely randomly.

Pair Corralation between Kroger and United Guardian

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 0.69 times more return on investment than United Guardian. However, Kroger Company is 1.44 times less risky than United Guardian. It trades about 0.05 of its potential returns per unit of risk. United Guardian is currently generating about -0.03 per unit of risk. If you would invest  6,204  in Kroger Company on December 27, 2024 and sell it today you would earn a total of  230.00  from holding Kroger Company or generate 3.71% return on investment over 90 days.

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

Kroger Company  vs.  United Guardian

Kroger Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Kroger is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

United Guardian

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kroger and United Guardian

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

The idea behind Kroger Company and United Guardian 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.