Correlation Between Sea and Kontoor Brands
Can any of the company-specific risk be diversified away by investing in both Sea and Kontoor Brands 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 Sea and Kontoor Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and Kontoor Brands, you can compare the effects of market volatilities on Sea and Kontoor Brands 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 Sea with a short position of Kontoor Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Kontoor Brands.
Diversification Opportunities for Sea and Kontoor Brands
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sea and Kontoor is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Sea 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 Sea are associated (or correlated) with Kontoor Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontoor Brands has no effect on the direction of Sea i.e., Sea and Kontoor Brands go up and down completely randomly.
Pair Corralation between Sea and Kontoor Brands
Allowing for the 90-day total investment horizon Sea is expected to generate 1.68 times more return on investment than Kontoor Brands. However, Sea is 1.68 times more volatile than Kontoor Brands. It trades about 0.22 of its potential returns per unit of risk. Kontoor Brands is currently generating about 0.01 per unit of risk. If you would invest 9,746 in Sea on September 12, 2024 and sell it today you would earn a total of 1,459 from holding Sea or generate 14.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. Kontoor Brands
Performance |
| Timeline |
| Sea |
| Kontoor Brands |
Sea and Kontoor Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Kontoor Brands
The main advantage of trading using opposite Sea and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, Kontoor Brands 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 Kontoor Brands will offset losses from the drop in Kontoor Brands' long position.The idea behind Sea and Kontoor Brands 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.| Kontoor Brands vs. J Long Group Limited | Kontoor Brands vs. Under Armour C | Kontoor Brands vs. Vince Holding Corp | Kontoor Brands vs. Figs 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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