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 ADR, 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
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arhaus and Kingfisher is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and Kingfisher PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher PLC ADR 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 ADR 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 generate 1.44 times more return on investment than Kingfisher PLC. However, Arhaus is 1.44 times more volatile than Kingfisher PLC ADR. It trades about 0.22 of its potential returns per unit of risk. Kingfisher PLC ADR is currently generating about -0.23 per unit of risk. If you would invest 878.00 in Arhaus Inc on August 26, 2024 and sell it today you would earn a total of 97.00 from holding Arhaus Inc or generate 11.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arhaus Inc vs. Kingfisher PLC ADR
Performance |
| Timeline |
| Arhaus Inc |
| Kingfisher PLC ADR |
Arhaus and Kingfisher PLC Volatility Contrast
Predicted Return Density |
| Returns |
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 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.| Kingfisher PLC vs. Tile Shop Holdings | Kingfisher PLC vs. Haverty Furniture Companies | Kingfisher PLC vs. Arhaus Inc | Kingfisher PLC vs. Kirklands |
Check out your portfolio center.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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