Correlation Between Koninklijke Ahold and Woolworths Group

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

Diversification Opportunities for Koninklijke Ahold and Woolworths Group

-0.67

Correlation Coefficient

Koninklijke Ahold  Woolworths Group

Excellent diversification

The 3 months correlation between Koninklijke and Woolworths is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group 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 Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Woolworths Group go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and Woolworths Group

Assuming the 90 days trading horizon Koninklijke Ahold Delhaize is expected to under-perform the Woolworths Group. In addition to that, Koninklijke Ahold is 1.03 times more volatile than Woolworths Group Limited. It trades about -0.2 of its total potential returns per unit of risk. Woolworths Group Limited is currently generating about -0.12 per unit of volatility. If you would invest  1,860  in Woolworths Group Limited on September 24, 2024 and sell it today you would lose (40.00) from holding Woolworths Group Limited or give up 2.15% of portfolio value over 90 days.

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

Koninklijke Ahold Delhaize  vs.  Woolworths Group Limited

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.

Woolworths Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Koninklijke Ahold and Woolworths Group

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

The idea behind Koninklijke Ahold Delhaize and Woolworths Group Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..