Correlation Between Kingfisher Plc and J Sainsbury

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

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

Diversification Opportunities for Kingfisher Plc and J Sainsbury

0.63

Correlation Coefficient

Kingfisher Plc  J Sainsbury

Poor diversification

The 3 months correlation between Kingfisher and JSNSF is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kingfisher plc and J Sainsbury plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury plc 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 are associated (or correlated) with J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury plc has no effect on the direction of Kingfisher Plc i.e., Kingfisher Plc and J Sainsbury go up and down completely randomly.

Pair Corralation between Kingfisher Plc and J Sainsbury

Assuming the 90 days horizon Kingfisher Plc is expected to generate 1.36 times less return on investment than J Sainsbury. But when comparing it to its historical volatility, Kingfisher plc is 1.7 times less risky than J Sainsbury. It trades about 0.11 of its potential returns per unit of risk. J Sainsbury plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  355.00  in J Sainsbury plc on September 28, 2024 and sell it today you would earn a total of  30.00  from holding J Sainsbury plc or generate 8.45% return on investment over 90 days.

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

Kingfisher plc  vs.  J Sainsbury plc

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 abnormal performance in the last few months, the Stock's technical 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.

J Sainsbury plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J Sainsbury plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, J Sainsbury is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kingfisher Plc and J Sainsbury

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

The idea behind Kingfisher plc and J Sainsbury 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.