Correlation Between Koninklijke Ahold and Lavide Holding

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

Diversification Opportunities for Koninklijke Ahold and Lavide Holding

0.07

Correlation Coefficient

Koninklijke Ahold  Lavide Holding

Significant diversification

The 3 months correlation between Koninklijke and Lavide is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Lavide Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lavide Holding NV 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 Lavide Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lavide Holding NV has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Lavide Holding go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and Lavide Holding

Assuming the 90 days horizon Koninklijke Ahold is expected to generate 8.22 times less return on investment than Lavide Holding. But when comparing it to its historical volatility, Koninklijke Ahold Delhaize is 6.23 times less risky than Lavide Holding. It trades about 0.07 of its potential returns per unit of risk. Lavide Holding NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Lavide Holding NV on September 14, 2024 and sell it today you would earn a total of  9.00  from holding Lavide Holding NV or generate 30.0% return on investment over 90 days.

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

Koninklijke Ahold Delhaize  vs.  Lavide Holding NV

Koninklijke Ahold

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Koninklijke Ahold is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lavide Holding NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lavide Holding NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lavide Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke Ahold and Lavide Holding

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

The idea behind Koninklijke Ahold Delhaize and Lavide Holding NV 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..