Correlation Between Marstons PLC and Kingfisher PLC

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

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

Diversification Opportunities for Marstons PLC and Kingfisher PLC

-0.08

Correlation Coefficient

Marstons PLC  Kingfisher PLC

Good diversification

The 3 months correlation between Marstons and Kingfisher is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Kingfisher PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher PLC ADR and Marstons 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 Marstons PLC 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 ADR has no effect on the direction of Marstons PLC i.e., Marstons PLC and Kingfisher PLC go up and down completely randomly.

Pair Corralation between Marstons PLC and Kingfisher PLC

Assuming the 90 days horizon Marstons PLC is expected to generate 0.99 times more return on investment than Kingfisher PLC. However, Marstons PLC is 1.01 times less risky than Kingfisher PLC. It trades about 0.03 of its potential returns per unit of risk. Kingfisher PLC ADR is currently generating about 0.01 per unit of risk. If you would invest  56.00  in Marstons PLC on November 28, 2024 and sell it today you would earn a total of  1.00  from holding Marstons PLC or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Marstons PLC  vs.  Kingfisher PLC ADR

Marstons PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marstons PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marstons PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Kingfisher PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingfisher PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Kingfisher PLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Marstons PLC and Kingfisher PLC

The main advantage of trading using opposite Marstons PLC and Kingfisher PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marstons PLC 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 Marstons PLC and Kingfisher PLC ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.