Correlation Between Kroger and Willamette Valley

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

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

Diversification Opportunities for Kroger and Willamette Valley

-0.07

Correlation Coefficient

Kroger  Willamette Valley

Good diversification

The 3 months correlation between Kroger and Willamette is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Kroger i.e., Kroger and Willamette Valley go up and down completely randomly.

Pair Corralation between Kroger and Willamette Valley

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 0.67 times more return on investment than Willamette Valley. However, Kroger Company is 1.49 times less risky than Willamette Valley. It trades about 0.1 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.05 per unit of risk. If you would invest  5,986  in Kroger Company on December 1, 2024 and sell it today you would earn a total of  496.00  from holding Kroger Company or generate 8.29% return on investment over 90 days.

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

Kroger Company  vs.  Willamette Valley Vineyards

Kroger Company

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 7 (%) 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.

Willamette Valley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Willamette Valley is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kroger and Willamette Valley

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

The idea behind Kroger Company and Willamette Valley Vineyards 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.