Correlation Between ITALIAN WINE and KRISPY KREME

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

By analyzing existing cross correlation between ITALIAN WINE BRANDS and KRISPY KREME DL 01, you can compare the effects of market volatilities on ITALIAN WINE and KRISPY KREME 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 ITALIAN WINE with a short position of KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and KRISPY KREME.

Diversification Opportunities for ITALIAN WINE and KRISPY KREME

-0.27

Correlation Coefficient

ITALIAN WINE  KRISPY KREME

Very good diversification

The 3 months correlation between ITALIAN and KRISPY is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL and ITALIAN WINE 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 ITALIAN WINE BRANDS are associated (or correlated) with KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and KRISPY KREME go up and down completely randomly.

Pair Corralation between ITALIAN WINE and KRISPY KREME

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the KRISPY KREME. But the stock apears to be less risky and, when comparing its historical volatility, ITALIAN WINE BRANDS is 1.09 times less risky than KRISPY KREME. The stock trades about -0.03 of its potential returns per unit of risk. The KRISPY KREME DL 01 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  982.00  in KRISPY KREME DL 01 on October 6, 2024 and sell it today you would lose (42.00) from holding KRISPY KREME DL 01 or give up 4.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

ITALIAN WINE BRANDS  vs.  KRISPY KREME DL 01

ITALIAN WINE BRANDS

Risk-Adjusted Performance

0 of 100

Very Weak

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

KRISPY KREME DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ITALIAN WINE and KRISPY KREME

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

The idea behind ITALIAN WINE BRANDS and KRISPY KREME DL 01 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.