Correlation Between Apple and Koninklijke Ahold

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

By analyzing existing cross correlation between Apple Inc and Koninklijke Ahold Delhaize, you can compare the effects of market volatilities on Apple and Koninklijke Ahold 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 Apple with a short position of Koninklijke Ahold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Koninklijke Ahold.

Diversification Opportunities for Apple and Koninklijke Ahold

0.56

Correlation Coefficient

Apple  Koninklijke Ahold

Very weak diversification

The 3 months correlation between Apple and Koninklijke is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Koninklijke Ahold Delhaize in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Ahold and Apple 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 Apple Inc are associated (or correlated) with Koninklijke Ahold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Ahold has no effect on the direction of Apple i.e., Apple and Koninklijke Ahold go up and down completely randomly.

Pair Corralation between Apple and Koninklijke Ahold

Given the investment horizon of 90 days Apple Inc is expected to generate 0.85 times more return on investment than Koninklijke Ahold. However, Apple Inc is 1.18 times less risky than Koninklijke Ahold. It trades about 0.44 of its potential returns per unit of risk. Koninklijke Ahold Delhaize is currently generating about 0.25 per unit of risk. If you would invest  16,562  in Apple Inc on February 21, 2024 and sell it today you would earn a total of  2,542  from holding Apple Inc or generate 15.35% return on investment over 90 days.

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

Apple Inc  vs.  Koninklijke Ahold Delhaize

Apple Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Koninklijke Ahold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Koninklijke Ahold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Apple and Koninklijke Ahold

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

The idea behind Apple Inc and Koninklijke Ahold Delhaize 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.