Correlation Between Kroger and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Kroger and Loblaw Companies 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 Loblaw Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kroger Company and Loblaw Companies Limited, you can compare the effects of market volatilities on Kroger and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and Loblaw Companies.
Diversification Opportunities for Kroger and Loblaw Companies
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Kroger and Loblaw is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Kroger i.e., Kroger and Loblaw Companies go up and down completely randomly.
Pair Corralation between Kroger and Loblaw Companies
Allowing for the 90-day total investment horizon Kroger Company is expected to generate 1.01 times more return on investment than Loblaw Companies. However, Kroger is 1.01 times more volatile than Loblaw Companies Limited. It trades about 0.2 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about 0.06 per unit of risk. If you would invest 5,680 in Kroger Company on August 27, 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kroger Company vs. Loblaw Companies Limited
Performance |
| Timeline |
| Kroger Company |
| Loblaw Companies |
Kroger and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kroger and Loblaw Companies
The main advantage of trading using opposite Kroger and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| Kroger vs. Innovative Food Hldg | Kroger vs. Calavo Growers | Kroger vs. The Chefs Warehouse | Kroger vs. AMCON Distributing |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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