Correlation Between Kroger and CSL

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

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

Diversification Opportunities for Kroger and CSL

-0.59

Correlation Coefficient

Kroger  CSL

Excellent diversification

The 3 months correlation between Kroger and CSL is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and Kroger 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 Kroger Company are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Kroger i.e., Kroger and CSL go up and down completely randomly.

Pair Corralation between Kroger and CSL

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 1.11 times more return on investment than CSL. However, Kroger is 1.11 times more volatile than CSL. It trades about 0.13 of its potential returns per unit of risk. CSL is currently generating about 0.12 per unit of risk. If you would invest  4,481  in Kroger Company on January 30, 2024 and sell it today you would earn a total of  1,068  from holding Kroger Company or generate 23.83% return on investment over 90 days.

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

Kroger Company  vs.  CSL

Kroger Company

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kroger and CSL

The main advantage of trading using opposite Kroger and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.

The idea behind Kroger Company and CSL 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.