Correlation Between Birks and Kirklands
Can any of the company-specific risk be diversified away by investing in both Birks and Kirklands 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 Birks and Kirklands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Birks Group and Kirklands, you can compare the effects of market volatilities on Birks and Kirklands 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 Birks with a short position of Kirklands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Birks and Kirklands.
Diversification Opportunities for Birks and Kirklands
Modest diversification
The 3 months correlation between Birks and Kirklands is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and Kirklands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirklands and Birks 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 Birks Group are associated (or correlated) with Kirklands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirklands has no effect on the direction of Birks i.e., Birks and Kirklands go up and down completely randomly.
Pair Corralation between Birks and Kirklands
Considering the 90-day investment horizon Birks Group is expected to under-perform the Kirklands. In addition to that, Birks is 3.06 times more volatile than Kirklands. It trades about -0.11 of its total potential returns per unit of risk. Kirklands is currently generating about -0.02 per unit of volatility. If you would invest 157.00 in Kirklands on November 18, 2024 and sell it today you would lose (2.00) from holding Kirklands or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Birks Group vs. Kirklands
Performance |
| Timeline |
| Birks Group |
| Kirklands |
Birks and Kirklands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Birks and Kirklands
The main advantage of trading using opposite Birks and Kirklands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birks position performs unexpectedly, Kirklands 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 Kirklands will offset losses from the drop in Kirklands' long position.The idea behind Birks Group and Kirklands 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.| Kirklands vs. Floor Decor Holdings | Kirklands vs. Haverty Furniture Companies | Kirklands vs. Tile Shop Holdings | Kirklands vs. Arhaus Inc |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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