Correlation Between AMG Advanced and Kingfisher PLC

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

By analyzing existing cross correlation between AMG Advanced Metallurgical and Kingfisher PLC, you can compare the effects of market volatilities on AMG Advanced and Kingfisher PLC 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 AMG Advanced with a short position of Kingfisher PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMG Advanced and Kingfisher PLC.

Diversification Opportunities for AMG Advanced and Kingfisher PLC

0.83

Correlation Coefficient

AMG Advanced  Kingfisher PLC

Very poor diversification

The 3 months correlation between AMG and Kingfisher is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding AMG Advanced Metallurgical and Kingfisher PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher PLC and AMG Advanced 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 AMG Advanced Metallurgical are associated (or correlated) with Kingfisher PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfisher PLC has no effect on the direction of AMG Advanced i.e., AMG Advanced and Kingfisher PLC go up and down completely randomly.

Pair Corralation between AMG Advanced and Kingfisher PLC

Assuming the 90 days trading horizon AMG Advanced Metallurgical is expected to generate 0.95 times more return on investment than Kingfisher PLC. However, AMG Advanced Metallurgical is 1.05 times less risky than Kingfisher PLC. It trades about 0.04 of its potential returns per unit of risk. Kingfisher PLC is currently generating about -0.03 per unit of risk. If you would invest  1,429  in AMG Advanced Metallurgical on September 12, 2024 and sell it today you would earn a total of  52.00  from holding AMG Advanced Metallurgical or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

AMG Advanced Metallurgical  vs.  Kingfisher PLC

AMG Advanced Metallu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AMG Advanced Metallurgical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AMG Advanced is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kingfisher PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingfisher PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kingfisher PLC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AMG Advanced and Kingfisher PLC

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

The idea behind AMG Advanced Metallurgical and Kingfisher PLC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.