Correlation Between Prosiebensat and Kingfisher PLC

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

By analyzing existing cross correlation between Prosiebensat 1 Media and Kingfisher PLC, you can compare the effects of market volatilities on Prosiebensat 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 Prosiebensat with a short position of Kingfisher PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosiebensat and Kingfisher PLC.

Diversification Opportunities for Prosiebensat and Kingfisher PLC

0.43

Correlation Coefficient

Prosiebensat  Kingfisher PLC

Very weak diversification

The 3 months correlation between Prosiebensat and Kingfisher is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Prosiebensat 1 Media and Kingfisher PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher PLC and Prosiebensat 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 Prosiebensat 1 Media 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 Prosiebensat i.e., Prosiebensat and Kingfisher PLC go up and down completely randomly.

Pair Corralation between Prosiebensat and Kingfisher PLC

Assuming the 90 days trading horizon Prosiebensat 1 Media is expected to generate 1.77 times more return on investment than Kingfisher PLC. However, Prosiebensat is 1.77 times more volatile than Kingfisher PLC. It trades about 0.06 of its potential returns per unit of risk. Kingfisher PLC is currently generating about -0.05 per unit of risk. If you would invest  541.00  in Prosiebensat 1 Media on December 5, 2024 and sell it today you would earn a total of  38.00  from holding Prosiebensat 1 Media or generate 7.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Prosiebensat 1 Media  vs.  Kingfisher PLC

Prosiebensat 1 Media

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prosiebensat 1 Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Prosiebensat may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kingfisher PLC

Risk-Adjusted Performance

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 Prosiebensat and Kingfisher PLC

The main advantage of trading using opposite Prosiebensat and Kingfisher PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosiebensat 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 Prosiebensat 1 Media 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.