Correlation Between National Retail and Kingfisher Plc

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

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

Diversification Opportunities for National Retail and Kingfisher Plc

0.47

Correlation Coefficient

National Retail  Kingfisher Plc

Very weak diversification

The 3 months correlation between National and Kingfisher is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Kingfisher Plc go up and down completely randomly.

Pair Corralation between National Retail and Kingfisher Plc

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the Kingfisher Plc. But the stock apears to be less risky and, when comparing its historical volatility, National Retail Properties is 1.32 times less risky than Kingfisher Plc. The stock trades about 0.0 of its potential returns per unit of risk. The Kingfisher plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  298.00  in Kingfisher plc on December 25, 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

National Retail Properties  vs.  Kingfisher plc

National Retail Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 National Retail and Kingfisher Plc

The main advantage of trading using opposite National Retail and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.