Correlation Between Kite Realty and BBB Foods

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

By analyzing existing cross correlation between Kite Realty Group and BBB Foods, you can compare the effects of market volatilities on Kite Realty and BBB Foods 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 Kite Realty with a short position of BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kite Realty and BBB Foods.

Diversification Opportunities for Kite Realty and BBB Foods

0.38

Correlation Coefficient

Kite Realty  BBB Foods

Weak diversification

The 3 months correlation between Kite and BBB is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kite Realty Group and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Kite Realty 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 Kite Realty Group are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Kite Realty i.e., Kite Realty and BBB Foods go up and down completely randomly.

Pair Corralation between Kite Realty and BBB Foods

Considering the 90-day investment horizon Kite Realty Group is expected to generate 0.35 times more return on investment than BBB Foods. However, Kite Realty Group is 2.89 times less risky than BBB Foods. It trades about 0.13 of its potential returns per unit of risk. BBB Foods is currently generating about -0.05 per unit of risk. If you would invest  2,582  in Kite Realty Group on August 30, 2024 and sell it today you would earn a total of  203.00  from holding Kite Realty Group or generate 7.86% return on investment over 90 days.

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

Kite Realty Group  vs.  BBB Foods

Kite Realty Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kite Realty Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Kite Realty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kite Realty and BBB Foods

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

The idea behind Kite Realty Group and BBB Foods 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.