Correlation Between Axfood AB and Jerónimo Martins

Can any of the company-specific risk be diversified away by investing in both Axfood AB and Jerónimo Martins 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 Axfood AB and Jerónimo Martins into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axfood AB and Jernimo Martins SGPS, you can compare the effects of market volatilities on Axfood AB and Jerónimo Martins 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 Axfood AB with a short position of Jerónimo Martins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axfood AB and Jerónimo Martins.

Diversification Opportunities for Axfood AB and Jerónimo Martins

0.52

Correlation Coefficient

Axfood AB  Jerónimo Martins

Very weak diversification

The 3 months correlation between Axfood and Jerónimo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Jernimo Martins SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jernimo Martins SGPS and Axfood AB 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 Axfood AB are associated (or correlated) with Jerónimo Martins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jernimo Martins SGPS has no effect on the direction of Axfood AB i.e., Axfood AB and Jerónimo Martins go up and down completely randomly.

Pair Corralation between Axfood AB and Jerónimo Martins

Assuming the 90 days trading horizon Axfood AB is expected to generate 1.89 times less return on investment than Jerónimo Martins. But when comparing it to its historical volatility, Axfood AB is 1.03 times less risky than Jerónimo Martins. It trades about 0.05 of its potential returns per unit of risk. Jernimo Martins SGPS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,820  in Jernimo Martins SGPS on December 22, 2024 and sell it today you would earn a total of  161.00  from holding Jernimo Martins SGPS or generate 8.85% return on investment over 90 days.

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

Axfood AB  vs.  Jernimo Martins SGPS

Axfood AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Axfood AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Axfood AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Jernimo Martins SGPS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jernimo Martins SGPS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Jerónimo Martins may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Axfood AB and Jerónimo Martins

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

The idea behind Axfood AB and Jernimo Martins SGPS 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .