Correlation Between Natural Grocers and Kroger

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

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

Diversification Opportunities for Natural Grocers and Kroger

0.77

Correlation Coefficient

Natural Grocers  Kroger

Poor diversification

The 3 months correlation between Natural and Kroger is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Natural Grocers by and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company and Natural Grocers 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 Natural Grocers by 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 Natural Grocers i.e., Natural Grocers and Kroger go up and down completely randomly.

Pair Corralation between Natural Grocers and Kroger

Given the investment horizon of 90 days Natural Grocers by is expected to generate 4.33 times more return on investment than Kroger. However, Natural Grocers is 4.33 times more volatile than Kroger Company. It trades about 0.43 of its potential returns per unit of risk. Kroger Company is currently generating about 0.11 per unit of risk. If you would invest  2,654  in Natural Grocers by on August 24, 2024 and sell it today you would earn a total of  1,906  from holding Natural Grocers by or generate 71.82% return on investment over 90 days.

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

Natural Grocers by  vs.  Kroger Company

Natural Grocers by

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Grocers by are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Natural Grocers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kroger Company

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Natural Grocers and Kroger

The main advantage of trading using opposite Natural Grocers and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Grocers 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 Natural Grocers by 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.