Correlation Between ZhongAn Online and Kingfisher Plc

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

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

Diversification Opportunities for ZhongAn Online and Kingfisher Plc

0.45

Correlation Coefficient

ZhongAn Online  Kingfisher Plc

Very weak diversification

The 3 months correlation between ZhongAn and Kingfisher is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and ZhongAn Online 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 ZhongAn Online P 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 ZhongAn Online i.e., ZhongAn Online and Kingfisher Plc go up and down completely randomly.

Pair Corralation between ZhongAn Online and Kingfisher Plc

Assuming the 90 days trading horizon ZhongAn Online P is expected to generate 2.38 times more return on investment than Kingfisher Plc. However, ZhongAn Online is 2.38 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 0.1 per unit of risk. If you would invest  143.00  in ZhongAn Online P on December 25, 2024 and sell it today you would earn a total of  14.00  from holding ZhongAn Online P or generate 9.79% return on investment over 90 days.

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

ZhongAn Online P  vs.  Kingfisher plc

ZhongAn Online P

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZhongAn Online P are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ZhongAn Online unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain forward indicators, Kingfisher Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ZhongAn Online and Kingfisher Plc

The main advantage of trading using opposite ZhongAn Online and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZhongAn Online 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 ZhongAn Online P 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.