Correlation Between Alphabet and Kroger

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

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

Diversification Opportunities for Alphabet and Kroger

0.41

Correlation Coefficient

Alphabet  Kroger

Very weak diversification

The 3 months correlation between Alphabet and Kroger is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Kroger go up and down completely randomly.

Pair Corralation between Alphabet and Kroger

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.96 times more return on investment than Kroger. However, Alphabet is 1.96 times more volatile than Kroger Company. It trades about 0.21 of its potential returns per unit of risk. Kroger Company is currently generating about -0.09 per unit of risk. If you would invest  15,650  in Alphabet Inc Class C on January 29, 2024 and sell it today you would earn a total of  1,719  from holding Alphabet Inc Class C or generate 10.98% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Kroger Company

Alphabet Class C

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported 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 unfluctuating basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Kroger

The main advantage of trading using opposite Alphabet and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Transaction History module to view history of all your transactions and understand their impact on performance.