Correlation Between Kingfisher PLC and Arhaus

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

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

Diversification Opportunities for Kingfisher PLC and Arhaus

0.76

Correlation Coefficient

Kingfisher PLC  Arhaus

Poor diversification

The 3 months correlation between Kingfisher and Arhaus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kingfisher PLC ADR and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc 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 ADR are associated (or correlated) with Arhaus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arhaus Inc has no effect on the direction of Kingfisher PLC i.e., Kingfisher PLC and Arhaus go up and down completely randomly.

Pair Corralation between Kingfisher PLC and Arhaus

Assuming the 90 days horizon Kingfisher PLC is expected to generate 4.56 times less return on investment than Arhaus. But when comparing it to its historical volatility, Kingfisher PLC ADR is 1.68 times less risky than Arhaus. It trades about 0.03 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  507.00  in Arhaus Inc on March 8, 2024 and sell it today you would earn a total of  1,421  from holding Arhaus Inc or generate 280.28% return on investment over 90 days.

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

Kingfisher PLC ADR  vs.  Arhaus Inc

Kingfisher PLC ADR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfisher PLC ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Kingfisher PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Arhaus Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arhaus Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, Arhaus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingfisher PLC and Arhaus

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

The idea behind Kingfisher PLC ADR and Arhaus Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.