Correlation Between Kroger and JD
Can any of the company-specific risk be diversified away by investing in both Kroger and JD 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 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kroger Company and JD Inc Adr, you can compare the effects of market volatilities on Kroger and JD 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and JD.
Diversification Opportunities for Kroger and JD
Almost no diversification
The 3 months correlation between Kroger and JD is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc Adr has no effect on the direction of Kroger i.e., Kroger and JD go up and down completely randomly.
Pair Corralation between Kroger and JD
Allowing for the 90-day total investment horizon Kroger is expected to generate 17.08 times less return on investment than JD. But when comparing it to its historical volatility, Kroger Company is 1.82 times less risky than JD. It trades about 0.02 of its potential returns per unit of risk. JD Inc Adr is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,607 in JD Inc Adr on January 25, 2024 and sell it today you would earn a total of 220.00 from holding JD Inc Adr or generate 8.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kroger Company vs. JD Inc Adr
Performance |
| Timeline |
| Kroger Company |
| JD Inc Adr |
Kroger and JD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kroger and JD
The main advantage of trading using opposite Kroger and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, JD 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 will offset losses from the drop in JD's long position.The idea behind Kroger Company and JD Inc Adr 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.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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