Correlation Between Loblaw Companies and Kroger

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

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

Diversification Opportunities for Loblaw Companies and Kroger

-0.33

Correlation Coefficient

Loblaw Companies  Kroger

Very good diversification

The 3 months correlation between Loblaw and Kroger is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited and The Kroger Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Kroger and Loblaw Companies 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 Loblaw Companies Limited are associated (or correlated) with Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Kroger has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Kroger go up and down completely randomly.

Pair Corralation between Loblaw Companies and Kroger

Assuming the 90 days horizon Loblaw Companies Limited is expected to under-perform the Kroger. But the stock apears to be less risky and, when comparing its historical volatility, Loblaw Companies Limited is 1.21 times less risky than Kroger. The stock trades about -0.01 of its potential returns per unit of risk. The The Kroger Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,896  in The Kroger Co on December 28, 2024 and sell it today you would earn a total of  99.00  from holding The Kroger Co or generate 1.68% return on investment over 90 days.

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

Loblaw Companies Limited  vs.  The Kroger Co

Loblaw Companies

Risk-Adjusted Performance

Very Weak

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

The Kroger

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Kroger Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Loblaw Companies and Kroger

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

The idea behind Loblaw Companies Limited and The Kroger Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.