Correlation Between Kingfisher Plc and Arhaus

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

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

Diversification Opportunities for Kingfisher Plc and Arhaus

-0.52

Correlation Coefficient

Kingfisher Plc  Arhaus

Excellent diversification

The 3 months correlation between Kingfisher and Arhaus is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kingfisher plc and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc and Kingfisher Plc 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 Kingfisher plc are associated (or correlated) with Arhaus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arhaus Inc has no effect on the direction of Kingfisher Plc i.e., Kingfisher Plc and Arhaus go up and down completely randomly.

Pair Corralation between Kingfisher Plc and Arhaus

Assuming the 90 days horizon Kingfisher plc is expected to under-perform the Arhaus. In addition to that, Kingfisher Plc is 1.04 times more volatile than Arhaus Inc. It trades about -0.01 of its total potential returns per unit of risk. Arhaus Inc is currently generating about 0.1 per unit of volatility. If you would invest  993.00  in Arhaus Inc on November 28, 2024 and sell it today you would earn a total of  198.00  from holding Arhaus Inc or generate 19.94% return on investment over 90 days.

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

Kingfisher plc  vs.  Arhaus Inc

Kingfisher plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingfisher plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Kingfisher Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Arhaus Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, Arhaus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingfisher Plc and Arhaus

The main advantage of trading using opposite Kingfisher Plc and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingfisher Plc position performs unexpectedly, Arhaus 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 Arhaus will offset losses from the drop in Arhaus' long position.

The idea behind Kingfisher plc and Arhaus Inc 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.