Correlation Between Village Super and Kroger

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

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

Diversification Opportunities for Village Super and Kroger

0.27

Correlation Coefficient

Village Super  Kroger

Modest diversification

The 3 months correlation between Village and Kroger is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Village Super Market and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Village Super 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 Village Super Market 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 Village Super i.e., Village Super and Kroger go up and down completely randomly.

Pair Corralation between Village Super and Kroger

Assuming the 90 days horizon Village Super Market is expected to generate 2.57 times more return on investment than Kroger. However, Village Super is 2.57 times more volatile than Kroger Company. It trades about 0.15 of its potential returns per unit of risk. Kroger Company is currently generating about 0.26 per unit of risk. If you would invest  2,901  in Village Super Market on September 4, 2024 and sell it today you would earn a total of  290.00  from holding Village Super Market or generate 10.0% return on investment over 90 days.

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

Village Super Market  vs.  Kroger Company

Village Super Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Super Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Village Super is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kroger Company

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Village Super and Kroger

The main advantage of trading using opposite Village Super and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Super 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 Village Super Market 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .