Correlation Between Kroger and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Kroger and Diageo PLC 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 Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kroger Company and Diageo PLC ADR, you can compare the effects of market volatilities on Kroger and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and Diageo PLC.
Diversification Opportunities for Kroger and Diageo PLC
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kroger and Diageo is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Kroger i.e., Kroger and Diageo PLC go up and down completely randomly.
Pair Corralation between Kroger and Diageo PLC
Allowing for the 90-day total investment horizon Kroger Company is expected to generate 1.01 times more return on investment than Diageo PLC. However, Kroger is 1.01 times more volatile than Diageo PLC ADR. It trades about 0.2 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.35 per unit of risk. If you would invest 5,680 in Kroger Company on August 28, 2024 and sell it today you would earn a total of 329.00 from holding Kroger Company or generate 5.79% 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. Diageo PLC ADR
Performance |
| Timeline |
| Kroger Company |
| Diageo PLC ADR |
Kroger and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kroger and Diageo PLC
The main advantage of trading using opposite Kroger and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| Kroger vs. Innovative Food Hldg | Kroger vs. Calavo Growers | Kroger vs. The Chefs Warehouse | Kroger vs. AMCON Distributing |
| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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