Correlation Between Ribbon Communications and Kroger

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

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

Diversification Opportunities for Ribbon Communications and Kroger

0.43

Correlation Coefficient

Ribbon Communications  Kroger

Very weak diversification

The 3 months correlation between Ribbon and Kroger is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and The Kroger Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Kroger and Ribbon Communications 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 Ribbon Communications 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 Ribbon Communications i.e., Ribbon Communications and Kroger go up and down completely randomly.

Pair Corralation between Ribbon Communications and Kroger

Assuming the 90 days trading horizon Ribbon Communications is expected to generate 1.28 times less return on investment than Kroger. In addition to that, Ribbon Communications is 1.02 times more volatile than The Kroger Co. It trades about 0.1 of its total potential returns per unit of risk. The Kroger Co is currently generating about 0.13 per unit of volatility. If you would invest  5,683  in The Kroger Co on October 5, 2024 and sell it today you would earn a total of  286.00  from holding The Kroger Co or generate 5.03% return on investment over 90 days.

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

Ribbon Communications  vs.  The Kroger Co

Ribbon Communications

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Ribbon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Ribbon Communications reported solid returns over the last few months and may actually be approaching a breakup point.

The Kroger

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days The Kroger Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ribbon Communications and Kroger

The main advantage of trading using opposite Ribbon Communications and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ribbon Communications 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 Ribbon Communications 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.