Correlation Between Koninklijke Ahold and Natural Grocers

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

Diversification Opportunities for Koninklijke Ahold and Natural Grocers

0.53

Correlation Coefficient

Koninklijke Ahold  Natural Grocers

Very weak diversification

The 3 months correlation between Koninklijke and Natural is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Ahold Delhaize and Natural Grocers by in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Grocers by 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 Natural Grocers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Grocers by has no effect on the direction of Koninklijke Ahold i.e., Koninklijke Ahold and Natural Grocers go up and down completely randomly.

Pair Corralation between Koninklijke Ahold and Natural Grocers

Assuming the 90 days horizon Koninklijke Ahold Delhaize is expected to generate 1.64 times more return on investment than Natural Grocers. However, Koninklijke Ahold is 1.64 times more volatile than Natural Grocers by. It trades about 0.13 of its potential returns per unit of risk. Natural Grocers by is currently generating about -0.14 per unit of risk. If you would invest  2,889  in Koninklijke Ahold Delhaize on February 2, 2024 and sell it today you would earn a total of  181.00  from holding Koninklijke Ahold Delhaize or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Koninklijke Ahold Delhaize  vs.  Natural Grocers by

Koninklijke Ahold

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Koninklijke Ahold may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Natural Grocers by

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Grocers by are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Natural Grocers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke Ahold and Natural Grocers

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

The idea behind Koninklijke Ahold Delhaize and Natural Grocers by 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.