Correlation Between Target and Krispy Kreme

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

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

Diversification Opportunities for Target and Krispy Kreme

0.51

Correlation Coefficient

Target  Krispy Kreme

Very weak diversification

The 3 months correlation between Target and Krispy is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Target and Krispy Kreme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krispy Kreme and Target 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 Target 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 has no effect on the direction of Target i.e., Target and Krispy Kreme go up and down completely randomly.

Pair Corralation between Target and Krispy Kreme

Considering the 90-day investment horizon Target is expected to generate 1.31 times more return on investment than Krispy Kreme. However, Target is 1.31 times more volatile than Krispy Kreme. It trades about 0.01 of its potential returns per unit of risk. Krispy Kreme is currently generating about -0.71 per unit of risk. If you would invest  13,053  in Target on September 24, 2024 and sell it today you would lose (3.00) from holding Target or give up 0.02% of portfolio value over 90 days.

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

Target  vs.  Krispy Kreme

Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Krispy Kreme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krispy Kreme has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Target and Krispy Kreme

The main advantage of trading using opposite Target and Krispy Kreme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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 Target and Krispy Kreme 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.