Correlation Between Coca Cola and Kroger

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Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and Kroger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and Kroger Company, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Kroger.

Diversification Opportunities for Coca Cola and Kroger

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Coca and Kroger is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Coca Cola 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 The Coca Cola 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 Coca Cola i.e., Coca Cola and Kroger go up and down completely randomly.

Pair Corralation between Coca Cola and Kroger

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Kroger. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.54 times less risky than Kroger. The stock trades about -0.31 of its potential returns per unit of risk. The Kroger Company is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,731  in Kroger Company on August 24, 2024 and sell it today you would earn a total of  189.50  from holding Kroger Company or generate 3.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Coca Cola  vs.  Kroger Company

 Performance 
       Timeline  
Coca Cola 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Kroger Company 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Coca Cola and Kroger Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Kroger

The main advantage of trading using opposite Coca Cola and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 The Coca Cola 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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