Correlation Between Kingfisher Plc and Landsea Homes

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

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

Diversification Opportunities for Kingfisher Plc and Landsea Homes

-0.43

Correlation Coefficient

Kingfisher Plc  Landsea Homes

Very good diversification

The 3 months correlation between Kingfisher and Landsea is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Kingfisher plc and Landsea Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landsea Homes 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 Landsea Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landsea Homes has no effect on the direction of Kingfisher Plc i.e., Kingfisher Plc and Landsea Homes go up and down completely randomly.

Pair Corralation between Kingfisher Plc and Landsea Homes

Assuming the 90 days horizon Kingfisher Plc is expected to generate 2.12 times less return on investment than Landsea Homes. But when comparing it to its historical volatility, Kingfisher plc is 4.06 times less risky than Landsea Homes. It trades about 0.03 of its potential returns per unit of risk. Landsea Homes is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Landsea Homes on December 30, 2024 and sell it today you would lose (3.88) from holding Landsea Homes or give up 35.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Kingfisher plc  vs.  Landsea Homes

Kingfisher plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfisher plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Landsea Homes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Landsea Homes are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Landsea Homes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kingfisher Plc and Landsea Homes

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

The idea behind Kingfisher plc and Landsea Homes 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.