Correlation Between Arhaus and Kingfisher Plc

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

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

Diversification Opportunities for Arhaus and Kingfisher Plc

0.6

Correlation Coefficient

Arhaus  Kingfisher Plc

Poor diversification

The 3 months correlation between Arhaus and Kingfisher is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and Arhaus 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 Arhaus Inc 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 Arhaus i.e., Arhaus and Kingfisher Plc go up and down completely randomly.

Pair Corralation between Arhaus and Kingfisher Plc

Given the investment horizon of 90 days Arhaus Inc is expected to under-perform the Kingfisher Plc. But the stock apears to be less risky and, when comparing its historical volatility, Arhaus Inc is 1.39 times less risky than Kingfisher Plc. The stock trades about -0.32 of its potential returns per unit of risk. The Kingfisher plc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  317.00  in Kingfisher plc on February 1, 2024 and sell it today you would lose (20.00) from holding Kingfisher plc or give up 6.31% of portfolio value over 90 days.

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

Arhaus Inc  vs.  Kingfisher plc

Arhaus Inc

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, Arhaus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kingfisher plc

Risk-Adjusted Performance

4 of 100

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 uncertain technical indicators, Kingfisher Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arhaus and Kingfisher Plc

The main advantage of trading using opposite Arhaus and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arhaus 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 Arhaus Inc 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 CEOs Directory module to screen CEOs from public companies around the world.