Correlation Between Mastercard and Kingfisher Plc

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

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

Diversification Opportunities for Mastercard and Kingfisher Plc

-0.87

Correlation Coefficient

Mastercard  Kingfisher Plc

Pay attention - limited upside

The 3 months correlation between Mastercard and Kingfisher is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and Mastercard 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 Mastercard 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 Mastercard i.e., Mastercard and Kingfisher Plc go up and down completely randomly.

Pair Corralation between Mastercard and Kingfisher Plc

Assuming the 90 days horizon Mastercard is expected to generate 0.53 times more return on investment than Kingfisher Plc. However, Mastercard is 1.89 times less risky than Kingfisher Plc. It trades about 0.12 of its potential returns per unit of risk. Kingfisher plc is currently generating about -0.19 per unit of risk. If you would invest  47,260  in Mastercard on September 22, 2024 and sell it today you would earn a total of  3,360  from holding Mastercard or generate 7.11% return on investment over 90 days.

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

Mastercard  vs.  Kingfisher plc

Mastercard

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Mastercard 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 Mastercard and Kingfisher Plc

The main advantage of trading using opposite Mastercard and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard 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 Mastercard 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.