Correlation Between Koninklijke Ahold and Dingdong ADR

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

Diversification Opportunities for Koninklijke Ahold and Dingdong ADR

-0.06

Correlation Coefficient

Koninklijke Ahold  Dingdong ADR

Good diversification

The 3 months correlation between Koninklijke and Dingdong is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR 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 Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Dingdong ADR go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and Dingdong ADR

Assuming the 90 days horizon Koninklijke Ahold Delhaize is expected to generate 0.22 times more return on investment than Dingdong ADR. However, Koninklijke Ahold Delhaize is 4.65 times less risky than Dingdong ADR. It trades about 0.12 of its potential returns per unit of risk. Dingdong ADR is currently generating about 0.02 per unit of risk. If you would invest  2,829  in Koninklijke Ahold Delhaize on September 8, 2024 and sell it today you would earn a total of  637.00  from holding Koninklijke Ahold Delhaize or generate 22.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.04%
Values	Daily Returns

Koninklijke Ahold Delhaize  vs.  Dingdong ADR

Koninklijke Ahold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Ahold Delhaize has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Koninklijke Ahold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Dingdong ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dingdong ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Dingdong ADR disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke Ahold and Dingdong ADR

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

The idea behind Koninklijke Ahold Delhaize and Dingdong ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.