Correlation Between Axfood AB and Kingfisher PLC

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

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

Diversification Opportunities for Axfood AB and Kingfisher PLC

0.06

Correlation Coefficient

Axfood AB  Kingfisher PLC

Significant diversification

The 3 months correlation between Axfood and Kingfisher is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Kingfisher PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher PLC and Axfood AB 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 Axfood AB 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 Axfood AB i.e., Axfood AB and Kingfisher PLC go up and down completely randomly.

Pair Corralation between Axfood AB and Kingfisher PLC

Assuming the 90 days trading horizon Axfood AB is expected to generate 0.46 times more return on investment than Kingfisher PLC. However, Axfood AB is 2.18 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 -0.16 per unit of risk. If you would invest  24,030  in Axfood AB on October 26, 2024 and sell it today you would lose (575.00) from holding Axfood AB or give up 2.39% of portfolio value over 90 days.

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

Axfood AB  vs.  Kingfisher PLC

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Axfood AB 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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Axfood AB and Kingfisher PLC

The main advantage of trading using opposite Axfood AB and Kingfisher PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axfood AB 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 Axfood AB 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.