Correlation Between Kingfisher Plc and Kesko Oyj

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

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

Diversification Opportunities for Kingfisher Plc and Kesko Oyj

0.26

Correlation Coefficient

Kingfisher Plc  Kesko Oyj

Modest diversification

The 3 months correlation between Kingfisher and Kesko is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kingfisher plc and Kesko Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kesko Oyj ADR 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 Kesko Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kesko Oyj ADR has no effect on the direction of Kingfisher Plc i.e., Kingfisher Plc and Kesko Oyj go up and down completely randomly.

Pair Corralation between Kingfisher Plc and Kesko Oyj

Assuming the 90 days horizon Kingfisher plc is expected to under-perform the Kesko Oyj. In addition to that, Kingfisher Plc is 1.93 times more volatile than Kesko Oyj ADR. It trades about -0.09 of its total potential returns per unit of risk. Kesko Oyj ADR is currently generating about -0.09 per unit of volatility. If you would invest  1,054  in Kesko Oyj ADR on September 28, 2024 and sell it today you would lose (122.00) from holding Kesko Oyj ADR or give up 11.57% of portfolio value over 90 days.

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

Kingfisher plc  vs.  Kesko Oyj ADR

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.

Kesko Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kesko Oyj ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kingfisher Plc and Kesko Oyj

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

The idea behind Kingfisher plc and Kesko Oyj 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.