Correlation Between Koninklijke Ahold and KRISPY KREME

Can any of the company-specific risk be diversified away by investing in both Koninklijke Ahold and KRISPY KREME 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 KRISPY KREME 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 KRISPY KREME DL 01, you can compare the effects of market volatilities on Koninklijke Ahold and KRISPY KREME 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 KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Ahold and KRISPY KREME.

Diversification Opportunities for Koninklijke Ahold and KRISPY KREME

0.07

Correlation Coefficient

Koninklijke Ahold  KRISPY KREME

Significant diversification

The 3 months correlation between Koninklijke and KRISPY is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL 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 KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and KRISPY KREME go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and KRISPY KREME

Assuming the 90 days trading horizon Koninklijke Ahold Delhaize is expected to generate 0.6 times more return on investment than KRISPY KREME. However, Koninklijke Ahold Delhaize is 1.66 times less risky than KRISPY KREME. It trades about -0.32 of its potential returns per unit of risk. KRISPY KREME DL 01 is currently generating about -0.45 per unit of risk. If you would invest  3,291  in Koninklijke Ahold Delhaize on September 29, 2024 and sell it today you would lose (167.00) from holding Koninklijke Ahold Delhaize or give up 5.07% of portfolio value over 90 days.

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

Koninklijke Ahold Delhaize  vs.  KRISPY KREME DL 01

Koninklijke Ahold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Koninklijke Ahold is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

KRISPY KREME DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Koninklijke Ahold and KRISPY KREME

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

The idea behind Koninklijke Ahold Delhaize and KRISPY KREME DL 01 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.