Correlation Between Krispy Kreme and Weis Markets

Can any of the company-specific risk be diversified away by investing in both Krispy Kreme and Weis Markets 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 Krispy Kreme and Weis Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Krispy Kreme and Weis Markets, you can compare the effects of market volatilities on Krispy Kreme and Weis Markets 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 Krispy Kreme with a short position of Weis Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krispy Kreme and Weis Markets.

Diversification Opportunities for Krispy Kreme and Weis Markets

-0.18

Correlation Coefficient

Krispy Kreme  Weis Markets

Good diversification

The 3 months correlation between Krispy and Weis is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and Weis Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weis Markets and Krispy Kreme 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 Krispy Kreme are associated (or correlated) with Weis Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weis Markets has no effect on the direction of Krispy Kreme i.e., Krispy Kreme and Weis Markets go up and down completely randomly.

Pair Corralation between Krispy Kreme and Weis Markets

Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the Weis Markets. In addition to that, Krispy Kreme is 2.21 times more volatile than Weis Markets. It trades about -0.3 of its total potential returns per unit of risk. Weis Markets is currently generating about -0.04 per unit of volatility. If you would invest  6,386  in Weis Markets on February 1, 2024 and sell it today you would lose (73.00) from holding Weis Markets or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Krispy Kreme  vs.  Weis Markets

Krispy Kreme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Krispy Kreme has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Krispy Kreme is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Weis Markets

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weis Markets are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady primary indicators, Weis Markets may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Krispy Kreme and Weis Markets

The main advantage of trading using opposite Krispy Kreme and Weis Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Krispy Kreme position performs unexpectedly, Weis Markets 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 Weis Markets will offset losses from the drop in Weis Markets' long position.

The idea behind Krispy Kreme and Weis Markets 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.