Correlation Between Koninklijke Ahold and Kesko Oyj

Can any of the company-specific risk be diversified away by investing in both Koninklijke Ahold and Kesko Oyj 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 Kesko Oyj 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 Kesko Oyj ADR, you can compare the effects of market volatilities on Koninklijke Ahold and Kesko Oyj 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 Kesko Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Ahold and Kesko Oyj.

Diversification Opportunities for Koninklijke Ahold and Kesko Oyj

0.01

Correlation Coefficient

Koninklijke Ahold  Kesko Oyj

Significant diversification

The 3 months correlation between Koninklijke and Kesko is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Kesko Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kesko Oyj ADR 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 Kesko Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kesko Oyj ADR has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Kesko Oyj go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and Kesko Oyj

Assuming the 90 days horizon Koninklijke Ahold is expected to generate 4.84 times less return on investment than Kesko Oyj. But when comparing it to its historical volatility, Koninklijke Ahold Delhaize is 1.86 times less risky than Kesko Oyj. It trades about 0.01 of its potential returns per unit of risk. Kesko Oyj ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  995.00  in Kesko Oyj ADR on September 12, 2024 and sell it today you would earn a total of  11.00  from holding Kesko Oyj ADR or generate 1.11% return on investment over 90 days.

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

Koninklijke Ahold Delhaize  vs.  Kesko Oyj ADR

Koninklijke Ahold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Ahold Delhaize has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Koninklijke Ahold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Kesko Oyj ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kesko Oyj ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Kesko Oyj is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Koninklijke Ahold and Kesko Oyj

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

The idea behind Koninklijke Ahold Delhaize and Kesko Oyj ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.