Correlation Between Haverty Furniture and Kingfisher Plc

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

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

Diversification Opportunities for Haverty Furniture and Kingfisher Plc

0.22

Correlation Coefficient

Haverty Furniture  Kingfisher Plc

Modest diversification

The 3 months correlation between Haverty and Kingfisher is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and Haverty Furniture 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 Haverty Furniture Companies 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 Haverty Furniture i.e., Haverty Furniture and Kingfisher Plc go up and down completely randomly.

Pair Corralation between Haverty Furniture and Kingfisher Plc

Assuming the 90 days horizon Haverty Furniture Companies is expected to generate 0.88 times more return on investment than Kingfisher Plc. However, Haverty Furniture Companies is 1.13 times less risky than Kingfisher Plc. It trades about 0.5 of its potential returns per unit of risk. Kingfisher plc is currently generating about -0.06 per unit of risk. If you would invest  3,036  in Haverty Furniture Companies on January 31, 2024 and sell it today you would earn a total of  209.00  from holding Haverty Furniture Companies or generate 6.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	18.18%
Values	Daily Returns

Haverty Furniture Companies  vs.  Kingfisher plc

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Kingfisher plc

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfisher plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Kingfisher Plc may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Haverty Furniture and Kingfisher Plc

The main advantage of trading using opposite Haverty Furniture and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haverty Furniture 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 Haverty Furniture Companies 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.