Correlation Between Koninklijke Ahold and Metro
Can any of the company-specific risk be diversified away by investing in both Koninklijke Ahold and Metro 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 Metro 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 Metro Inc, you can compare the effects of market volatilities on Koninklijke Ahold and Metro 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 Metro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Ahold and Metro.
Diversification Opportunities for Koninklijke Ahold and Metro
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Koninklijke and Metro is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc 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 Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Metro go up and down completely randomly.
Pair Corralation between Koninklijke Ahold and Metro
Assuming the 90 days horizon Koninklijke Ahold Delhaize is expected to generate 3.22 times more return on investment than Metro. However, Koninklijke Ahold is 3.22 times more volatile than Metro Inc. It trades about 0.1 of its potential returns per unit of risk. Metro Inc is currently generating about -0.36 per unit of risk. If you would invest 2,855 in Koninklijke Ahold Delhaize on January 25, 2024 and sell it today you would earn a total of 131.00 from holding Koninklijke Ahold Delhaize or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Koninklijke Ahold Delhaize vs. Metro Inc
Performance |
| Timeline |
| Koninklijke Ahold |
| Metro Inc |
Koninklijke Ahold and Metro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Koninklijke Ahold and Metro
The main advantage of trading using opposite Koninklijke Ahold and Metro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Ahold position performs unexpectedly, Metro 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 Metro will offset losses from the drop in Metro's long position.| Koninklijke Ahold vs. Casino Guichard Perrachon Socit | Koninklijke Ahold vs. Ocado Group PLC | Koninklijke Ahold vs. J Sainsbury PLC | Koninklijke Ahold vs. Village Super Market |
Check out your portfolio center.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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