Correlation Between Kroger and Home Depot

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Kroger and Home Depot 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 Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kroger Company and Home Depot, you can compare the effects of market volatilities on Kroger and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kroger and Home Depot.

Diversification Opportunities for Kroger and Home Depot

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Kroger and Home Depot is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Kroger Company and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Kroger i.e., Kroger and Home Depot go up and down completely randomly.

Pair Corralation between Kroger and Home Depot

Allowing for the 90-day total investment horizon Kroger Company is expected to generate 1.3 times more return on investment than Home Depot. However, Kroger is 1.3 times more volatile than Home Depot. It trades about 0.04 of its potential returns per unit of risk. Home Depot is currently generating about 0.02 per unit of risk. If you would invest  3,479  in Kroger Company on May 9, 2022 and sell it today you would earn a total of  1,246  from holding Kroger Company or generate 35.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kroger Company  vs.  Home Depot

 Performance (%) 
       Timeline  
Kroger Company 
Kroger Performance
0 of 100
Over the last 90 days Kroger Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in September 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Kroger Price Channel

Home Depot 
Home Depot Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

Kroger and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kroger and Home Depot

The main advantage of trading using opposite Kroger and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kroger position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.
The idea behind Kroger Company and Home Depot 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

Other Complementary Tools

Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Go
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Shere Portfolio
Track or share privately all of your investments from the convenience of any device
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Go
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go