Correlation Between Koninklijke Ahold and Sendas Distribuidora

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

By analyzing existing cross correlation between Koninklijke Ahold Delhaize and Sendas Distribuidora SA, you can compare the effects of market volatilities on Koninklijke Ahold and Sendas Distribuidora 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 Koninklijke Ahold with a short position of Sendas Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Ahold and Sendas Distribuidora.

Diversification Opportunities for Koninklijke Ahold and Sendas Distribuidora

-0.73

Correlation Coefficient

Koninklijke Ahold  Sendas Distribuidora

Pay attention - limited upside

The 3 months correlation between Koninklijke and Sendas is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Sendas Distribuidora SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sendas Distribuidora and Koninklijke Ahold 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 Koninklijke Ahold Delhaize are associated (or correlated) with Sendas Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sendas Distribuidora has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Sendas Distribuidora go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and Sendas Distribuidora

Assuming the 90 days horizon Koninklijke Ahold is expected to generate 1.46 times less return on investment than Sendas Distribuidora. But when comparing it to its historical volatility, Koninklijke Ahold Delhaize is 1.24 times less risky than Sendas Distribuidora. It trades about 0.11 of its potential returns per unit of risk. Sendas Distribuidora SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  447.00  in Sendas Distribuidora SA on December 30, 2024 and sell it today you would earn a total of  13.00  from holding Sendas Distribuidora SA or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	14.52%
Values	Daily Returns

Koninklijke Ahold Delhaize  vs.  Sendas Distribuidora SA

Koninklijke Ahold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Koninklijke Ahold reported solid returns over the last few months and may actually be approaching a breakup point.

Sendas Distribuidora

Risk-Adjusted Performance

OK

Over the last 90 days Sendas Distribuidora SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, Sendas Distribuidora demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke Ahold and Sendas Distribuidora

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

The idea behind Koninklijke Ahold Delhaize and Sendas Distribuidora SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.