Correlation Between Kingfisher Plc and Topbuild Corp

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

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

Diversification Opportunities for Kingfisher Plc and Topbuild Corp

-0.47

Correlation Coefficient

Kingfisher Plc  Topbuild Corp

Very good diversification

The 3 months correlation between Kingfisher and Topbuild is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Kingfisher plc and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp 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 Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Kingfisher Plc i.e., Kingfisher Plc and Topbuild Corp go up and down completely randomly.

Pair Corralation between Kingfisher Plc and Topbuild Corp

Assuming the 90 days horizon Kingfisher plc is expected to generate 1.57 times more return on investment than Topbuild Corp. However, Kingfisher Plc is 1.57 times more volatile than Topbuild Corp. It trades about 0.05 of its potential returns per unit of risk. Topbuild Corp is currently generating about 0.01 per unit of risk. If you would invest  305.00  in Kingfisher plc on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Kingfisher plc or generate 7.21% 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.  Topbuild Corp

Kingfisher plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfisher plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Kingfisher Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Topbuild Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Topbuild Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kingfisher Plc and Topbuild Corp

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

The idea behind Kingfisher plc and Topbuild Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.