Correlation Between Kroger and Metro
Can any of the company-specific risk be diversified away by investing in both Kroger and Metro 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 Metro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kroger Company and Metro Inc, you can compare the effects of market volatilities on Kroger and Metro 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 Metro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and Metro.
Diversification Opportunities for Kroger and Metro
Very weak diversification
The 3 months correlation between Kroger and Metro is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc 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 Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of Kroger i.e., Kroger and Metro go up and down completely randomly.
Pair Corralation between Kroger and Metro
Allowing for the 90-day total investment horizon Kroger Company is expected to generate 1.56 times more return on investment than Metro. However, Kroger is 1.56 times more volatile than Metro Inc. It trades about -0.07 of its potential returns per unit of risk. Metro Inc is currently generating about -0.38 per unit of risk. If you would invest 5,648 in Kroger Company on January 19, 2024 and sell it today you would lose (104.00) from holding Kroger Company or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kroger Company vs. Metro Inc
Performance |
| Timeline |
| Kroger Company |
| Metro Inc |
Kroger and Metro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kroger and Metro
The main advantage of trading using opposite Kroger and Metro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, Metro 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 Metro will offset losses from the drop in Metro's long position.The idea behind Kroger Company and Metro Inc 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.| Metro vs. Mannatech Incorporated | Metro vs. Edgewell Personal Care | Metro vs. Inter Parfums | Metro vs. Nu Skin Enterprises |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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