Correlation Between Tile Shop and Kingfisher Plc

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

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

Diversification Opportunities for Tile Shop and Kingfisher Plc

-0.7

Correlation Coefficient

Tile Shop  Kingfisher Plc

Excellent diversification

The 3 months correlation between Tile and Kingfisher is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and Tile Shop 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 Tile Shop Holdings 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 Tile Shop i.e., Tile Shop and Kingfisher Plc go up and down completely randomly.

Pair Corralation between Tile Shop and Kingfisher Plc

Assuming the 90 days horizon Tile Shop Holdings is expected to generate 0.97 times more return on investment than Kingfisher Plc. However, Tile Shop Holdings is 1.03 times less risky than Kingfisher Plc. It trades about 0.11 of its potential returns per unit of risk. Kingfisher plc is currently generating about -0.16 per unit of risk. If you would invest  575.00  in Tile Shop Holdings on September 22, 2024 and sell it today you would earn a total of  85.00  from holding Tile Shop Holdings or generate 14.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Tile Shop Holdings  vs.  Kingfisher plc

Tile Shop Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tile Shop Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tile Shop reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tile Shop and Kingfisher Plc

The main advantage of trading using opposite Tile Shop and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop 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 Tile Shop Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..