Correlation Between Target and Kroger

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

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

Diversification Opportunities for Target and Kroger

-0.63

Correlation Coefficient

Target  Kroger

Excellent diversification

The 3 months correlation between Target and Kroger is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Target and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Target i.e., Target and Kroger go up and down completely randomly.

Pair Corralation between Target and Kroger

Considering the 90-day investment horizon Target is expected to generate 24.94 times less return on investment than Kroger. In addition to that, Target is 1.62 times more volatile than Kroger Company. It trades about 0.0 of its total potential returns per unit of risk. Kroger Company is currently generating about 0.06 per unit of volatility. If you would invest  4,352  in Kroger Company on October 2, 2024 and sell it today you would earn a total of  1,763  from holding Kroger Company or generate 40.51% return on investment over 90 days.

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

Target  vs.  Kroger Company

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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Kroger Company

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Target and Kroger

The main advantage of trading using opposite Target and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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 Target and Kroger Company 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.