Correlation Between Ford and Koninklijke Ahold
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Koninklijke Ahold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Koninklijke Ahold Delhaize, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Koninklijke Ahold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Koninklijke Ahold.
Diversification Opportunities for Ford and Koninklijke Ahold
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Koninklijke is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Koninklijke Ahold Delhaize in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Ahold and Ford 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 Ford Motor 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 Ford i.e., Ford and Koninklijke Ahold go up and down completely randomly.
Pair Corralation between Ford and Koninklijke Ahold
Taking into account the 90-day investment horizon Ford is expected to generate 2.44 times less return on investment than Koninklijke Ahold. In addition to that, Ford is 2.29 times more volatile than Koninklijke Ahold Delhaize. It trades about 0.04 of its total potential returns per unit of risk. Koninklijke Ahold Delhaize is currently generating about 0.23 per unit of volatility. If you would invest 3,097 in Koninklijke Ahold Delhaize on August 28, 2024 and sell it today you would earn a total of 179.00 from holding Koninklijke Ahold Delhaize or generate 5.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Koninklijke Ahold Delhaize
Performance |
| Timeline |
| Ford Motor |
| Koninklijke Ahold |
Ford and Koninklijke Ahold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Koninklijke Ahold
The main advantage of trading using opposite Ford and Koninklijke Ahold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Koninklijke Ahold vs. Unilever PLC | Koninklijke Ahold vs. Koninklijke Philips NV | Koninklijke Ahold vs. NN Group NV | Koninklijke Ahold vs. ING Groep NV |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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