Correlation Between Kroger and BG Foods
Can any of the company-specific risk be diversified away by investing in both Kroger and BG Foods 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 BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kroger Company and BG Foods, you can compare the effects of market volatilities on Kroger and BG Foods 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 BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and BG Foods.
Diversification Opportunities for Kroger and BG Foods
Very weak diversification
The 3 months correlation between Kroger and BGS is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Kroger i.e., Kroger and BG Foods go up and down completely randomly.
Pair Corralation between Kroger and BG Foods
Allowing for the 90-day total investment horizon Kroger Company is expected to generate 0.66 times more return on investment than BG Foods. However, Kroger Company is 1.52 times less risky than BG Foods. It trades about 0.41 of its potential returns per unit of risk. BG Foods is currently generating about -0.29 per unit of risk. If you would invest 5,890 in Kroger Company on November 9, 2024 and sell it today you would earn a total of 601.00 from holding Kroger Company or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kroger Company vs. BG Foods
Performance |
| Timeline |
| Kroger Company |
| BG Foods |
Kroger and BG Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kroger and BG Foods
The main advantage of trading using opposite Kroger and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.| Kroger vs. Grocery Outlet Holding | Kroger vs. Sprouts Farmers Market | Kroger vs. Weis Markets | Kroger vs. Ingles Markets Incorporated |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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