Correlation Between Gen Digital and Kroger

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

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

Diversification Opportunities for Gen Digital and Kroger

0.62

Correlation Coefficient

Gen Digital  Kroger

Poor diversification

The 3 months correlation between Gen and Kroger is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and The Kroger Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Kroger and Gen Digital 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 Gen Digital 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 Gen Digital i.e., Gen Digital and Kroger go up and down completely randomly.

Pair Corralation between Gen Digital and Kroger

Assuming the 90 days trading horizon Gen Digital is expected to generate 22.93 times less return on investment than Kroger. But when comparing it to its historical volatility, Gen Digital is 34.89 times less risky than Kroger. It trades about 0.23 of its potential returns per unit of risk. The Kroger Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  32,571  in The Kroger Co on October 11, 2024 and sell it today you would earn a total of  3,609  from holding The Kroger Co or generate 11.08% return on investment over 90 days.

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

Gen Digital  vs.  The Kroger Co

Gen Digital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gen Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

The Kroger

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Kroger Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kroger sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gen Digital and Kroger

The main advantage of trading using opposite Gen Digital and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gen Digital 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 Gen Digital 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.