Correlation Between Home Depot and Kingfisher Plc
Can any of the company-specific risk be diversified away by investing in both Home Depot 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 Home Depot and Kingfisher Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Kingfisher plc, you can compare the effects of market volatilities on Home Depot 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 Home Depot with a short position of Kingfisher Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Kingfisher Plc.
Diversification Opportunities for Home Depot and Kingfisher Plc
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Kingfisher is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc and Home Depot 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 Home Depot 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 Home Depot i.e., Home Depot and Kingfisher Plc go up and down completely randomly.
Pair Corralation between Home Depot and Kingfisher Plc
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.78 times less return on investment than Kingfisher Plc. But when comparing it to its historical volatility, Home Depot is 3.1 times less risky than Kingfisher Plc. It trades about 0.13 of its potential returns per unit of risk. Kingfisher plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 250.00 in Kingfisher plc on August 25, 2024 and sell it today you would earn a total of 130.00 from holding Kingfisher plc or generate 52.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 71.22% |
| Values | Daily Returns |
Home Depot vs. Kingfisher plc
Performance |
| Timeline |
| Home Depot |
| Kingfisher plc |
Home Depot and Kingfisher Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Kingfisher Plc
The main advantage of trading using opposite Home Depot and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot 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.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| Kingfisher Plc vs. Lowes Companies | Kingfisher Plc vs. Home Depot | Kingfisher Plc vs. Live Ventures | Kingfisher Plc vs. Haverty Furniture Companies |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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