Correlation Between Caseys General and Kroger

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

By analyzing existing cross correlation between Caseys General Stores and Kroger Company, you can compare the effects of market volatilities on Caseys General and Kroger 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 Caseys General with a short position of Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and Kroger.

Diversification Opportunities for Caseys General and Kroger

0.71

Correlation Coefficient

Caseys General  Kroger

Poor diversification

The 3 months correlation between Caseys and Kroger is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Caseys General 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 Caseys General Stores are associated (or correlated) with Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Caseys General i.e., Caseys General and Kroger go up and down completely randomly.

Pair Corralation between Caseys General and Kroger

Given the investment horizon of 90 days Caseys General Stores is expected to generate 0.68 times more return on investment than Kroger. However, Caseys General Stores is 1.47 times less risky than Kroger. It trades about 0.08 of its potential returns per unit of risk. Kroger Company is currently generating about -0.1 per unit of risk. If you would invest  31,495  in Caseys General Stores on February 1, 2024 and sell it today you would earn a total of  463.00  from holding Caseys General Stores or generate 1.47% return on investment over 90 days.

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

Caseys General Stores  vs.  Kroger Company

Caseys General Stores

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caseys General showed solid returns over the last few months and may actually be approaching a breakup point.

Kroger Company

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caseys General and Kroger

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

The idea behind Caseys General Stores and Kroger Company 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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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.