Correlation Between Scottish Mortgage and Kingfisher Plc

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

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

Diversification Opportunities for Scottish Mortgage and Kingfisher Plc

-0.18

Correlation Coefficient

Scottish Mortgage  Kingfisher Plc

Good diversification

The 3 months correlation between Scottish and Kingfisher is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and Scottish Mortgage 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 Scottish Mortgage Investment 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 Scottish Mortgage i.e., Scottish Mortgage and Kingfisher Plc go up and down completely randomly.

Pair Corralation between Scottish Mortgage and Kingfisher Plc

Assuming the 90 days trading horizon Scottish Mortgage is expected to generate 4.33 times less return on investment than Kingfisher Plc. In addition to that, Scottish Mortgage is 1.0 times more volatile than Kingfisher plc. It trades about 0.02 of its total potential returns per unit of risk. Kingfisher plc is currently generating about 0.1 per unit of volatility. If you would invest  298.00  in Kingfisher plc on December 24, 2024 and sell it today you would earn a total of  31.00  from holding Kingfisher plc or generate 10.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Scottish Mortgage Investment  vs.  Kingfisher plc

Scottish Mortgage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Scottish Mortgage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Kingfisher plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfisher plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Kingfisher Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Scottish Mortgage and Kingfisher Plc

The main advantage of trading using opposite Scottish Mortgage and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scottish Mortgage 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 Scottish Mortgage Investment 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.