Correlation Between Kontoor Brands and First CommunityPFD
Can any of the company-specific risk be diversified away by investing in both Kontoor Brands and First CommunityPFD 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 Kontoor Brands and First CommunityPFD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kontoor Brands and First Community, you can compare the effects of market volatilities on Kontoor Brands and First CommunityPFD 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 Kontoor Brands with a short position of First CommunityPFD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kontoor Brands and First CommunityPFD.
Diversification Opportunities for Kontoor Brands and First CommunityPFD
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kontoor and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First CommunityPFD and Kontoor Brands 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 Kontoor Brands are associated (or correlated) with First CommunityPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First CommunityPFD has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and First CommunityPFD go up and down completely randomly.
Pair Corralation between Kontoor Brands and First CommunityPFD
Considering the 90-day investment horizon Kontoor Brands is expected to generate 4.06 times more return on investment than First CommunityPFD. However, Kontoor Brands is 4.06 times more volatile than First Community. It trades about 0.1 of its potential returns per unit of risk. First Community is currently generating about 0.12 per unit of risk. If you would invest 7,234 in Kontoor Brands on August 29, 2024 and sell it today you would earn a total of 1,836 from holding Kontoor Brands or generate 25.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kontoor Brands vs. First Community
Performance |
| Timeline |
| Kontoor Brands |
| First CommunityPFD |
Kontoor Brands and First CommunityPFD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kontoor Brands and First CommunityPFD
The main advantage of trading using opposite Kontoor Brands and First CommunityPFD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kontoor Brands position performs unexpectedly, First CommunityPFD 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 First CommunityPFD will offset losses from the drop in First CommunityPFD's long position.| Kontoor Brands vs. J Long Group Limited | Kontoor Brands vs. Ralph Lauren Corp | Kontoor Brands vs. Under Armour C | Kontoor Brands vs. Vince Holding Corp |
| First CommunityPFD vs. KeyCorp | First CommunityPFD vs. Maplebear Common Stock | First CommunityPFD vs. Aquagold International | First CommunityPFD 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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