Correlation Between Kingfisher PLC and Home Depot
Can any of the company-specific risk be diversified away by investing in both Kingfisher PLC and Home Depot 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 Home Depot 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 Home Depot, you can compare the effects of market volatilities on Kingfisher PLC and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingfisher PLC and Home Depot.
Diversification Opportunities for Kingfisher PLC and Home Depot
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Kingfisher and Home is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kingfisher PLC ADR and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Kingfisher PLC i.e., Kingfisher PLC and Home Depot go up and down completely randomly.
Pair Corralation between Kingfisher PLC and Home Depot
Assuming the 90 days horizon Kingfisher PLC ADR is expected to under-perform the Home Depot. In addition to that, Kingfisher PLC is 2.13 times more volatile than Home Depot. It trades about -0.32 of its total potential returns per unit of risk. Home Depot is currently generating about 0.3 per unit of volatility. If you would invest 39,046 in Home Depot on August 31, 2024 and sell it today you would earn a total of 3,867 from holding Home Depot or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kingfisher PLC ADR vs. Home Depot
Performance |
| Timeline |
| Kingfisher PLC ADR |
| Home Depot |
Kingfisher PLC and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kingfisher PLC and Home Depot
The main advantage of trading using opposite Kingfisher PLC and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingfisher PLC position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Kingfisher PLC vs. Porsche Automobile Holding | Kingfisher PLC vs. Ferrari NV | Kingfisher PLC vs. Toyota Motor | Kingfisher PLC vs. General Motors |
| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
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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