Correlation Between Koninklijke Ahold and Kroger

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

Diversification Opportunities for Koninklijke Ahold and Kroger

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Koninklijke and Kroger is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Kroger go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and Kroger

Assuming the 90 days horizon Koninklijke Ahold is expected to generate 9.81 times less return on investment than Kroger. But when comparing it to its historical volatility, Koninklijke Ahold Delhaize is 2.56 times less risky than Kroger. It trades about 0.09 of its potential returns per unit of risk. Kroger Company is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  4,853  in Kroger Company on December 30, 2023 and sell it today you would earn a total of  860.00  from holding Kroger Company or generate 17.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Koninklijke Ahold Delhaize  vs.  Kroger Company

 Performance 
       Timeline  
Koninklijke Ahold 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.
Kroger Company 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Koninklijke Ahold and Kroger Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Koninklijke Ahold and Kroger

The main advantage of trading using opposite Koninklijke Ahold and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Ahold position performs unexpectedly, Kroger 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 Kroger will offset losses from the drop in Kroger's long position.
The idea behind Koninklijke Ahold Delhaize and Kroger Company 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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