Correlation Between Kontoor Brands and VF
Can any of the company-specific risk be diversified away by investing in both Kontoor Brands and VF 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 VF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kontoor Brands and VF Corporation, you can compare the effects of market volatilities on Kontoor Brands and VF 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 VF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kontoor Brands and VF.
Diversification Opportunities for Kontoor Brands and VF
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kontoor and VF is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corporation 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 VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and VF go up and down completely randomly.
Pair Corralation between Kontoor Brands and VF
Considering the 90-day investment horizon Kontoor Brands is expected to generate 0.63 times more return on investment than VF. However, Kontoor Brands is 1.59 times less risky than VF. It trades about 0.08 of its potential returns per unit of risk. VF Corporation is currently generating about -0.03 per unit of risk. If you would invest 4,069 in Kontoor Brands on January 24, 2024 and sell it today you would earn a total of 1,669 from holding Kontoor Brands or generate 41.02% 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. VF Corp.
Performance |
| Timeline |
| Kontoor Brands |
| VF Corporation |
Kontoor Brands and VF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kontoor Brands and VF
The main advantage of trading using opposite Kontoor Brands and VF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kontoor Brands position performs unexpectedly, VF 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 VF will offset losses from the drop in VF's long position.The idea behind Kontoor Brands and VF Corporation 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.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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