Correlation Between WW International and Krispy Kreme

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

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

Diversification Opportunities for WW International and Krispy Kreme

-0.33

Correlation Coefficient

WW International  Krispy Kreme

Very good diversification

The 3 months correlation between WW International and Krispy is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding WW International and Krispy Kreme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krispy Kreme and WW International 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 WW International 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 WW International i.e., WW International and Krispy Kreme go up and down completely randomly.

Pair Corralation between WW International and Krispy Kreme

Allowing for the 90-day total investment horizon WW International is expected to generate 7.2 times more return on investment than Krispy Kreme. However, WW International is 7.2 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 -0.43 per unit of risk. If you would invest  125.00  in WW International on September 27, 2024 and sell it today you would lose (6.00) from holding WW International or give up 4.8% of portfolio value over 90 days.

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

WW International  vs.  Krispy Kreme

WW International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, WW International showed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with WW International and Krispy Kreme

The main advantage of trading using opposite WW International and Krispy Kreme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW International 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 WW International 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.