Correlation Between KROGER and JD Sports

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Can any of the company-specific risk be diversified away by investing in both KROGER and JD Sports 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 JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KROGER 69 percent and JD Sports Fashion, you can compare the effects of market volatilities on KROGER and JD Sports 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of KROGER and JD Sports.

Diversification Opportunities for KROGER and JD Sports

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between KROGER and JDDSF is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding KROGER 69 percent and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 69 percent are associated (or correlated) with JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of KROGER i.e., KROGER and JD Sports go up and down completely randomly.

Pair Corralation between KROGER and JD Sports

Assuming the 90 days trading horizon KROGER 69 percent is expected to generate 12.37 times more return on investment than JD Sports. However, KROGER is 12.37 times more volatile than JD Sports Fashion. It trades about 0.05 of its potential returns per unit of risk. JD Sports Fashion is currently generating about 0.03 per unit of risk. If you would invest  11,500  in KROGER 69 percent on September 3, 2024 and sell it today you would lose (972.00) from holding KROGER 69 percent or give up 8.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy62.63%
ValuesDaily Returns

KROGER 69 percent  vs.  JD Sports Fashion

 Performance 
       Timeline  
KROGER 69 percent 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days KROGER 69 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KROGER 69 percent investors.
JD Sports Fashion 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

KROGER and JD Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KROGER and JD Sports

The main advantage of trading using opposite KROGER and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KROGER position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.
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The idea behind KROGER 69 percent and JD Sports Fashion 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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